The Government has rubber-stamped funding for the controversial realignment of the Hall Lane route into Liverpool city centre from Edge Lane and the M62.
The department for transport will pay £17.1m of the £18.7m cost of the scheme to straighten the road past the Royal Liverpool University Hospital.
The project was mooted ten years ago and met with initial objections from local residents who objected to houses being demolished. It is closely tied to the Edge Lane widening project that was only recently approved after several years stuck in High Court battles with campaigner Elizabeth Pascoe.
The DfT said the new road will remove a notorious bottleneck and help to attract business, visitors and investment to Liverpool.
Phil Woolas, regional minister for the North West, said: "This is the latest piece of the jigsaw in building a world class city, and will help attract visitors and business. The barriers to improving the most important route between the M62 and Liverpool city centre have been removed and work can begin on the Hall Lane Strategic Gateway.
"The Government's contribution of £17.1m to carry out this essential work will transform what has been a major hold up into the city for traffic, cyclists and pedestrians."
Main construction work is due to commence in October 2009 with the scheme expected to be completed by July 2011.