Construction of the Heysham to M6 link road is set to begin this summer after the secretary of state for transport granted approval.
The estimated cost of the project is £123m. The department for transport will contribute £111m and Lancashire County Council will fund the remaining £12m.
Cllr Tim Ashton, cabinet member for highways and transport, said: "Lancashire has been anticipating this news for decades.
"The M6 link is more than just a road-building scheme, it will be an engine for economic growth for the whole region.
"The new road will reduce congestion and greatly increase the potential for investment in the surrounding area.
"To reach this point has taken many years of work by a number of organisations and individuals who have helped to make the case for the link road, and I'd like to thank them for their support and dedication."
The road will connect the peninsula directly to the M6, providing better access to Morecambe and industrial areas, which include the Port of Heysham and the Heysham power stations. It also aims to reduce congestion in the Lancaster area on Caton Road, Morecambe Road and the Greyhound and Skerton bridges.
The port, the third largest in the North West, is developing as a hub for services to Ireland and is the supply base for an offshore gas field and wind farms. The road would also improve access to a proposed third nuclear power station.
The link road project features a park and ride scheme with buses running into Lancaster city centre, and bus priority, cycle and walking measures.
More than 3,000 people are due to be employed during construction, whilst a minimum of 100 local unemployed people will receive training and jobs.
The scheme includes a number of measures to protect the environment by improving wildlife habitats, tree cover and watercourses.
The government approval includes compulsory purchase powers as well as planning permission, and the county council will now write to the affected landowners and start the formal process of acquiring the remaining land required for the road.
Archaeological investigation works have begun, and involve using excavators to dig trial trenches to establish if there are any finds that require further investigation before the main construction works begin later in the summer.