The proposed route would run through Pencader, Llanybydder, Lampeter and Tregaron and would cost at least £500m to construct.
The route study, which will cost £30,000, will assess whether there is a business case for reopening the line, with the results due in the autumn.
Traws Link Cymru, a group set up to campaign for the line’s reopening, will work with the Welsh government to conduct the study.
The line was closed to passengers in 1965 due to floods and the ‘Beeching Axe’. The tracks were lifted in 1975.
Transport minister Edwina Hart AM confirmed news of the study in a letter to Ceredigion AM Elin Jones.
Ms. Hart said the initial study would “develop the scope, cost and work required to develop a business case for an optimum line of route” between Aberystwyth and Carmarthen.
“I have asked my officials to work with Traws Link Cymru on this initial study,” she added.
“I have also asked them to facilitate the production of the study through the appointment of independent transport consultants under a Welsh government framework contract.”