Construction on a new roundabout at the intersection of Camp and Church streets in Kangaroo Flat will begin next Monday.
The project aims to increase the safety of the intersection which has seen three casualty accidents since 2013.
Works are expected to go until July. City of Greater Bendigo engineering manager Brett Martini said detours will be in place during the construction.
"This project involves the construction of a new roundabout complete with drainage, concrete kerbs, lighting, signage and line marking upgrades to improve the safety of this intersection," Mr Martini said.
"Significant temporary detours which may affect landowners, business operators and residents from accessing their properties will be put in place in Camp Street (east of Church Street), Tarran Court, Station Street and Chapel Street.
"This is a busy part of Kangaroo Flat that adjoins the commercial area and is a key linkage to other parts of Bendigo so the new roundabout will provide much improved traffic flows in the area.
"The contractors undertaking this project will work with affected residents to provide access to and from properties in the area.
"Depending on the weather and COVID-19 requirements we expect this project will be completed by the end of July."
The federal government's Black Spot Programme is funding the project through a $366,500 grant.
Member for Bendigo Lisa Chesters welcomed the project and said the Black Spot Programme was important for a number of reasons.
"This intersection has a tragic and dangerous history, the improvements are vital," she said.
"The construction of the new roundabout, which includes drainage, concreting, lighting, signage and line marking, will support a number of local jobs.
"The Black Spot Programme has bipartisan support. Road funding across our region is essential, not only because of obvious safety reasons, but because it also boosts the local economy.
"I urge the Federal Government to increase funding through this program to help stimulate the local economy on the back of the COVID-19 pandemic."