The funding would cover training for about 200 primary industry students.
Hipkins gave no indication on Telford's longer-term future, and said staffing would be reduced to 20 full-time equivalent, from a current roster of 33 full and part-time employees.
Staff and those involved with negotiations during recent weeks reacted to the news with mixed emotions.
Senior shearing tutor Ken Payne described the announcement as "bittersweet''.
"It's fantastic to have SIT on board, but then you read on and see staff cuts and limitations on the deal and that feeling is tempered.
"The devil will be in the detail, but I guess we have to put our best foot forward now and demonstrate this is where tertiary agricultural training needs to be happening.''
Clutha Mayor Bryan Cadogan was similarly cautious.
"I'm thankful and relieved we've finally got an outcome and that Telford lives to fight another day. But my thoughts are with staff in particular as the details continue to emerge over coming days. It's imperative their situation is resolved as quickly as possible. The sooner we get the doors open, the better.''
Lawrence-based list MP Mark Patterson was more bullish, and told the Otago Daily Times he was confident the one-year deal would lead to a permanent arrangement for Telford.
"It was always vital we did what we had to do to get the gates open for 2019. The important thing will be to use this as a basis to build Telford back up to where the agricultural sector needs it to be. I have no doubt Telford will continue to play a huge part in training many generations of farmers to come.''
Clutha-Southland MP Hamish Walker urged the Government to provide assurances on Telford's longer-term future.
"I'm thrilled the gates ... will remain open for another 12 months.
"But ... the Government needs to ensure its long-term security,'' Walker said.
"It's incredibly disappointing the long-term proposal was turned down, and the Government needs to work hard throughout 2019 to provide a future for Telford and ensure this is not a Band-Aid solution.''
Although silent on its longer-term future, Hipkins said Telford would form part of discussions concerning wider reform in the sector.
"We've chosen to continue to invest [in Telford] while the longer-term change is being considered, as SIT is a strong institution with solid financial backing. There is no similar proposal for Taratahi at this stage.''
SIT chief executive Penny Simmonds was unavailable for comment last night.