The European Bank for Reconstruction and Development (EBRD) will lend €100m ($131.49m) to Serbian state-owned railway company Zeleznice Srbije to modernise its rail operations.
The loan will finance the upgrade of 111km of track on Corridor X, the primary transport route in Serbia.
It will also cover the purchase of track maintenance machinery and 15 electric locomotives.
In addition, Zeleznice Srbije will receive €650,000 ($854 685) from the Central European Initiative, the German Government and the bank's shareholder special fund for the project.
To date, the EBRD has committed over €300m ($394.4m) to Zeleznice Srbije for the modernisation of Serbia's railways.