Australia's second-largest aluminium smelter - Rio Tinto's Boyne aluminium smelter in the central Queensland town of Gladstone - will be the beneficiary of the cash splash.
The investment will support 1000 jobs at the site and another two thousand other roles around Gladstone, federal Industry Minister Tim Ayres said.
In return, Rio Tinto will pour $7.5 billion into new renewable energy generation and storage projects around Queensland.
The bill for the $2 billion funding boost will be split equally between the Queensland and Federal governments, Senator Ayres said.
"With a considerable public investment, we are catalysing a fourfold private investment that will build out the renewable energy grid and keep thousands of good regional jobs in central Queensland," he said in a statement on Wednesday morning.
The partnership between the smelter and the two governments would allow the smelter to continue operating until at least 2040 while building out Queensland's renewable energy grid, Rio Tinto aluminium and lithium chief executive Jérôme Pécresse said.
"As fossil fuels become increasingly expensive, this investment, combined with the power purchase agreements we have already signed, positions Boyne to be among the world's first aluminium smelters underpinned by solar and wind power," he said.
The Boyne smelter has been operating in Gladstone since 1982.
It refines raw alumina - produced from bauxite ore - into aluminium and then casts the molten metal into products, ready to ship.
Last year, the federal government also helped bail out Glencore's copper smelter in Queensland, the Whyalla steelworks in South Australia and Nyrstar smelters in Hobart and Port Pirie.
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