The money will go to Dubbo Regional Council so it can undertake an investigation into the best location and route for the bridge, state Member for Dubbo Dugald Saunders announced.

Mr Saunders secured the study money after Dubbo Regional Councillors threatened to campaign against the government if it did not take action to resolve simmering community tensions about a plan to build a $140 million bridge connecting River Street to Whylandra Street.

He said he supported calls "for a south bridge"

"I have been adamant...there isn't just one way to fix the issues the city will confront in the coming years," he said.

"Our Building Better Dubbo projects will deliver improved flood immunity and help relieve congestion through the middle of town but we also need to start investing in other traffic needs for the city."

Dubbo Region mayor Ben Shields welcomed the funding announcement.

"There's a lot to work out but we're finally getting some sort of movement... [and] acknowledgement there is a congestion issue," he said.

"The biggest issue that is annoying people is that then River Street Bridge proposal does not take one car of Whylandra Street."

Mr Saunders and Mr Shields were unable to say when the study would be completed.

"The study will be conducted by Dubbo Regional Council, and as such the timeline for its completion is dependent on council," Mr Saunders said.

"I have had multiple discussions with council about the project and it is a priority, so I'm hopeful it will be completed sooner rather than later."

Mr Saunders said money for the study was given the tick of approval by Regional Roads Minister Paul Toole and is coming out of a Regional and Rural Road Fund.