The ban was introduced on New Year's Day because of concerns about crowding on trains.

Minister for Public Transport Lynne Kosky said the State Government had listened to feedback and was responding with a policy that acknowledged the needs of both cyclists and commuters.

"Limitation to bikes on trains were announced in response to train patronage growing by more than 20 per cent over the past two years," Ms Kosky said.

She said bikes would now be allowed on all V/Line services and from April, tram and bus users would be allowed to take folding bikes on all services, provided they were folded and contained within a carry bag.

Ms Kosky also announced $1 million in funding for new bike cages across the metropolitan and regional train network.

"The initial problem of bikes taking up space on trains hasn't disappeared," she said.

"To begin addressing the problem we will need to place more secure, modern bike storage facilities at stations."

Ballarat Bicycle Users Group president John Barnes yesterday welcomed the news.

"We, of course, would like to encourage more people to combine cycling and public transport," he said.

"We think they're important improvements that will make cycling that much easier for people to choose as an option."

Mr Barnes also said he was pleased about extra funding for bicycle cages.

The State Government will trial new bicycle cages at Eltham station in April then hold discussions with bike user groups to determine other possible locations.