The institution would be built at a site next to the select-entry boys' school in South Yarra and provide much-needed services for gifted students from regional Victoria.

It would include a state-government-funded residential college where boys and girls would board while they studied at the state's four select-entry high schools – Melbourne High School, Macrobertson Girls' High School, Nossal High School and Suzanne Cory High School.

"The Government wants to ensure that regional students get access to the excellent education resources provided by select-entry schools," Education Minister James Merlino said.

The idea has been in the pipeline for a number of years, and was given a significant boost following a 2012 parliamentary inquiry into gifted education.

The Education Department has appointed Ernst and Young to investigate the funding, construction and governance of the academy as part of a feasibility study.

The Victorian School Building Authority states that the project is now in its planning phase.

In 2014 the former Coalition state government pledged it would spend $10 million building the gifted academy if it won the election.

This would include a 40-bed boarding facility which would be used during the school term as a residential college for rural students enrolled at selective-entry high schools.

The opposition's education spokesman Nick Wakeling criticised the Andrews government for not building the academy earlier.

"A Liberal Nationals Government would have had this school built now and ready to take its first wave of students," he said.

In 2013, the not-for-profit Melbourne High School Foundation bought a site on Chapel Street, which has a planning permit, for the academy.

The school has also submitted a proposal to the Department and said in a 2015 report that the academy would would "act as a hub for professional training, research and program delivery as well as a residential hostel for regional students who gain entry to our select-entry schools."

Australian Catholic University gifted education expert Dr John Munro said many gifted students were not being identified, and could feel isolated in smaller, rural schools.

He said a gifted academy would provide students with mentors, and exposure to new ideas and other gifted children which may not be available in the country.

"Exposure to more people would challenge their thinking more broadly," he said.

He said rural gifted students would be able to share their unique knowledge with their city counterpart, and vice versa.

Carmel Meehan from the Victorian Association for Gifted and Talented Children said it was important for gifted children to work alongside like-minded students.

"They also need opportunities to allow their gifts and talents to flourish with staff who understand them and can teach them physically, mentally, socially and academically," she said.

Ms Meehan said rural families with gifted children were screaming out for support.

An Education Department spokesman said that the study would look at the potential costs and operating models for the academy.