The scheme, which is expected to take a year to complete, aims to reduce congestion, create an extra lane on the A509 between the junction and Northfield roundabout and increase capacity at the Northfield, Pineham and Fox Milne roundabouts.
Existing traffic lanes within the scheme will remain open and operational during the morning and evening rush hours.
The scheme will also provide 360 new car parking spaces at the Park-and-Ride site and will deliver a new building at the Milton Keynes Coachway site.
Milton Keynes Council transport manager Kevin Whiteside said: “This is the beginning of major improvements to the city’s highways and public transport and will be the starting block for expansion on the eastern flank of the city.””
Jane Hamilton, chief operating officer for Milton Keynes Partnership, said: “”We have worked hard with Government, Milton Keynes Council and the Highways Agency to ensure this project, which is vital to the growth of Milton Keynes is funded.””
The new buildings for the Coachway and the Park and Ride will be the responsibility of the new operator currently undergoing selection by Milton Keynes Partnership. All the projects will be synchronised so that completion of all the improvements coincides.
The value of the contract is likely to be in excess of Â£16 million and will be one of the largest construction projects managed and led by Milton Keynes Council.
The project is a key element of Milton Keynes Partnershipâ€™s Growth Plan for Milton Keynes.”