The state will receive two new Spirit of Tasmania vessels in 2021 – two years ahead of schedule.
The vessels will be 30-per-cent bigger than the current ships.
Passenger capacity will be increased by 43 per cent and freight capacity by 39 percent.
Premier Will Hodgman said the new ships would be able to bring 500 additional visitors, 115 additional passenger vehicles, and 85 additional freight trailers
Infrastructure Minister Rene Hidding said a contract with an international builder was expected to be signed during the first six months of 2018.
“While it is unfortunate that there are no Australian shipyards with the capacity to build the new Spirits, we will ensure Tasmanian products are used in the fit-out,” he said.
Mr Hidding said costs could not be discussed until a contract was signed.
He said the cost of the project would be funded through TT-Lines revenue projections and a special once-off $20 million payment from the state government.
The company has already committed $80 million to the ship’s replacement fund.
The design of the vessels will be similar to the current ships but longer, wider, deeper and higher.
They will run on liquefied natural gas and diesel.
TT-Line Michael Grainger said the ships would be world-class "floating hotels" that would take the company through for 30 years.
He said the company would not be competing with other freight carriers as TT-Line operated in a more timely, niche market and there was no intention to carry container freight like others did.
TT-Line chief executive Bernard Dwyer said tourism demand, in particular, had prompted the company to move quicker to get the new vessels on the water.
"We're almost at capacity ... and our projections are saying that we're not necessarily fulfilling all the demand at the moment coming into the state,” he said.
"We have the cash flow in the business to be able to move forward."
Tourism Industry Council Tasmania chief executive Luke Martin said the bigger Spirits would boost visitation to the state’s regional areas.
“We know visitors to Tasmania who arrive by sea stay longer, spend more and disperse further into regional areas of the State than those who arrive by air,” he said.