Cornwall Council will receive up to £1.8 million over two years to run year-round flights between London and Newquay.
Eastern Airways will operate the route, it was confirmed last week. Flybe had previously fulfilled the PSO before it collapsed in February 2020.
The Department for Transport (DfT) on Monday said services would operate from Gatwick under a reinstated PSO, which it said would create "hundreds of jobs" while keeping people connected.
A further £2.5 milllion, meanwhile, will be allocated to funding direct flights for a further two years between Dundee and London City airport. Loganair will operate the route.
Aviation minister Robert Courts said: "We’re maintaining these vital transport links, including the hugely popular London to Dundee and the reinstated Newquay to London routes, for people right across the country for tourism and business travel.
"The government is fully behind UK regional connectivity and strengthening these routes as we build back better from the pandemic."
Eastern’s Gatwick-Newquay flights will operate daily from 15 December before going double-daily from mid-January. One-way fares will lead in from £34.99pp including a 15kg hold bag. Flights will be operated by ATR72-600 aircraft.