Mr Dey was speaking during a visit to Leven where he also announced the options being taken forward for the locations for Leven and Cameron Bridge Stations.
The Leven Station is to be located behind the Leisure Centre and Cameron Bridge Station will be to the east of the A915. The options were confirmed following detailed development work as well as stakeholder consultation for the new rail link.
Network Rail has been commissioned to design and construct the Levenmouth rail link. The project costs will be confirmed with Final Business Case, expected towards the end of this year.
Project timescales will depend on Fife Council planning processes, subject to which the line should be open in 2024.
Mr Dey said: "I'm pleased to confirm that we plan to double track and electrify the Levenmouth rail link and also open two new stations. This will ensure local communities can benefit from improved connectivity and sustainable travel options.
"Our Programme for Government made a commitment to decarbonising Scotland's Railway and growth in rail use is an essential part of decarbonising the total transport mix. Investment in sustainable transport must be front and centre when deciding on future priorities.
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"This scheme will see the re-opening of the disused rail line between Thornton junction and Leven, providing new passenger rail services to connect the Levenmouth area to Fife, Edinburgh, and the wider rail network.
"I look forward to seeing this exciting project get underway in the coming months and would like to thank everyone involved in getting it to this stage."
Network Rail's Capital Delivery Director Kris Kinnear said: "We're working hard alongside the Scottish Government to bring the benefits of the railway to communities across Scotland.
"The Minister's announcement today is a green light to reconnect Leven to the mainline network. The new railway will enhance the communities it serves and contribute positively to the lives of the people who live there by unlocking access to social, cultural, employment and educational opportunity.
"We will continue to engage with the local community and stakeholders as we work to develop and deliver the project by December 2023."
Fife Council Co-leader Cllr David Alexander said: "There's a lot of investment and partnership work coming together in Levenmouth. Today's announcement is a huge, and very welcome, step forward for the region and builds on the work of the £10 million Levenmouth Reconnected Programme which aims to unlock access to culture, leisure, training and employment opportunities for the area.
"This also means a lot personally, as a local councillor and a train user from the old Cameron Bridge Station. Many people have fought to deliver this, with ultimate success."
Fife Council Co-leader Cllr David Ross added: "We are working to maximise the economic and social value of the new Levenmouth railway to the local area, developing initiatives and projects that build on this railway investment-led opportunity.
"A lot of hard work by many people went into getting us to this stage. This represents a huge opportunity for Levenmouth and the whole of Fife and we'll make sure we make the most it."
Electrification reduces journey times, thus expanding labour markets and improving access to education, potentially benefitting socio-economically disadvantaged groups.
The improvements identified for local bus services, active travel and the Blueprint fund are being progressed by Fife Council.
