A new, second traffic island will be build at the A5/A48 junction, bypassing the current Mile End roundabout and also providing access to the proposed Oswestry Innovation Park.
Clearance work will begin on site from Monday and temporary traffic measures are going in to allow contractors to prepare to start work.
The work could take 12 months to complete. Balfour Beatty has been given the contract to carry carry it out.
The works will lead to traffic being diverted from the A5 to a new, four-arm roundabout to the north-east of the existing junction, with a link road to the current roundabout.
The new roundabout will allow traffic using the A5 to bypass the existing Mile End roundabout in a bid to reduce congestion and provide access to the proposed Oswestry Innovation Park.
Shropshire Council says it will also allow plans for new housing just off the Oswestry bypass to be brought forward.
Steve Charmley, the council’s cabinet member for assets, economic growth and regeneration, said the upgrade to the junction would be a massive step forward in the council's plans to boost Oswestry as a place to live, work and visit and concentrate on its economic growth .
He said: “The roundabout as it is can become very busy and this will not only relieve that stress, but will also open up possibilities to bring this end of Oswestry into the future and provide a gateway to the town for workers and visitors alike.
“The work will enable the proposed Innovation Park which will bring potentially hundreds of new jobs to the town and also the planned housing proposals. This is a really positive step forward for Oswestry and I am looking forward to seeing the work starting.”
Shropshire Council has accessed funds from the Housing Infrastructure Fund through Homes England and the Marches Local Enterprise Partnership for the project.
Traffic calming measures will include 40mph speed limits on all approaches to the roundabout.