The 9.7km Caernarfon and Bontnewydd bypass will be built from the Goat roundabout on the A499/A487 junction to the Plas Menai roundabout, around Llanwnda, Dinas, Bontnewydd and Caernarfon avoiding the town centres.
Made up of three sections separated by new roundabouts at Meifod and Cibyn, work will now begin to award a design and build contract, with detailed scheme design commencing in June.
Construction could then start in November, with completion scheduled for spring 2021.
News that the project would go ahead was revealed by First Minister Carwyn Jones and Transport Secretary Ken Skates during a visit to Bontnewydd on Thursday, 24 May.
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First Minister Carwyn Jones said: "It's great news we will be pressing ahead with the Caernarfon and Bontnewydd bypass.
"The bypass will not only help connect communities in the area through sustainable and resilient infrastructure, but also provide a vital link to the A55 and beyond to Ireland, England and Europe.
"It also presents a big opportunity for local employment, workforce training and apprenticeships, especially during the construction phase."
Cabinet Secretary for Economy and Transport, Ken Skates, said: "I am pleased to announce the go-ahead for the Caernarfon and Bontnewydd bypass. This is a major scheme and one which will bring many benefits to the area. It will be a real boost to the region and foster conditions for sustainable economic development and employment opportunities.
"The bypass will help remove traffic congestion, improve air quality and reduce noise emissions in Caernarfon, Bontnewydd and the surrounding villages resulting in healthier communities and environments.
"It will also provide improved links to tourist destinations in the Llŷn Peninsula and Snowdonia as well as great opportunities for active travel within and around Caernarfon by linking with surrounding communities."
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