More than 1000 Western Australian jobs will be created with works on the $175 million Albany Ring Road scheduled to begin in September.
The project will improve connections between major freight infrastructure, like airports and commercial and industrial areas, linking roads and highways from Albany in the state's Great Southern region.
Anticipated to be completed in 2023, it also aims to create more economic opportunity.
Federal Transport and Infrastructure Minister Michael McCormack says the Albany Ring Road is a critical piece of infrastructure that will underpin the region's future economic success.
Last year, the federal government allocated $140 million in the budget for the project.
The state government is contributing $35 million.
"The first phase of the connection will be the new interchange at Albany Highway and Menang Drive, as well as construction of the section of the Ring Road south to Lancaster Road," Mr McCormack said on Tuesday.
"Detailed designs for the second phase of the project, from Lancaster Road to Princess Royal Drive, will also take place over the next 12 months, enabling construction to begin subject to environmental approvals being received."
Federal Member for O'Connor Rick Wilson said the project will deliver significant safety benefits.
"By reducing the number of heavy vehicles on Albany Highway, South Coast Highway and Chester Pass Road, it will relieve congestion for the freight industry and enhance safety for local and tourist traffic," he said.
Australian Associated Press