The 26 kilometer railway linking West Kowloon to the border will plug Hong Kong into China's national high speed network.
It was initially scheduled to be completed by the end of last year, but now is delayed to the third quarter of 2018.
As a result, the cost of construction has surged to almost 85 billion HK dollars, almost twice the previous estimate, making it the most expensive railway in the Special Administrative Region.
The government has blamed the cost overruns on factors including unfavorable ground conditions and price escalation.
Approval for the additional funds was granted after the acting chairman for the finance committee Chan Kam-lam called for a vote amid protests by some lawmakers on Friday afternoon.
"Please raise your hands if you support the item. Please raise your hands if you object to the item. I consider the motion has been passed."
Frederick Ma, chairman of rail operator MTR Corporation, welcomes the result.
"We originally planned to submit a proposal to the government on Monday to suspend construction, but this won't be necessary now. The approval ensures that the ongoing construction on the high-speed rail link will continue. "
Up to 7 thousand people in the construction industry in Hong Kong would have lost their jobs if the project had been suspended.
MTR CEO Lincoln Leung says he is delighted to hear that funding has come through.
"We will now proceed with this project with full speed and have high confidence that we can meet the target schedule and budget as the project is already more than 77 per cent completed by now."
After completion, the new rail link will take only 14 minutes to travel from Hong Kong to the neighboring mainland city of Shenzhen, and the travel time from Hong Kong to Guangzhou will be cut by half to only 50 minutes.
Even though the funds have been approved, other thorny issues concerning the link are yet to be solved, including development of a plan to allow mainland officials to work in the Hong Kong territory for border inspections.
It will require amendment to the Hong Kong Basic Law.
