Toll road operator Transurban, the state government's partner in the project, on Thursday confirmed that Hi-Quality in Bulla had been chosen to construct a purpose-built facility to collect, treat and dispose of the soil.

Hi-Quality's tip, north of Melbourne Airport, was nominated by the tunnel's builders, CPB Contractors and John Holland, as the preferred site for the soil.

Two other sites were also considered.

Hi-Quality estimates up to 200 jobs will be created during construction of the facility, while 50 workers will be hired to operate the soil site once it is completed in about six months.

"Transurban and its builder have had over four years to resolve this issue, and while we're pleased they have finally made a decision, they need to get on with setting up the site and getting the tunnel boring machines going," a state government spokeswoman told AAP.

The $6.7 billion tunnel, which will be an alternative to the city's heavily congested West Gate Bridge, was originally scheduled to be completed in 2022.

But tunnelling was delayed in 2019 after soil contaminated with per- and polyfluoroalkyl substances (PFAS) - dangerous chemicals that have been widely used in firefighting foam - were discovered at the construction site.

Hundreds of workers on the project have lost their jobs because of the delay.

Testing shows the levels of PFAS in the soil is expected to be low and at safe levels for the community and the environment.

Opposition environment spokeswoman Bridget Vallence described the move as a "massive kick in the guts to the Bulla community".

"Labor has treated local families with absolute contempt, and will be dumping millions of tonnes of toxic soil on the doorstep of thousands of homes from its trouble-plagued West Gate Tunnel project," she said in a statement.

Ms Vallence said the Bulla site is across the road from a housing development the state government just approved.

Australian Associated Press