Some £5 million of funding has been awarded for work to create a new junction on the A1 at Grantham.
Highways England has said the significant project will also help create 5,000 new jobs.
Funding for the new £23 million junction on the A1 south of Grantham will enable plans for the 193-hectare Spitalgate Heath Garden Villages urban extension to move forward.
Highways England’s £100 million Growth and Housing Fund provides financial contributions towards the cost of road improvements that are needed for new developments which promise delivery of homes and jobs.
The new junction, part-funded by developer and local authority funds, will unlock more than 1,000 new full-time jobs on the sites it will directly serve, the government-owned company has said.
A further 4,000 jobs and up to 3,700 homes will also be created in a new urban extension, which will include a new local centre, schools, community facilities, conserved woodland and a network of innovative “blue green corridors” to assist with flood alleviation.
The urban extension programme will be delivered by the local authority with support from the Homes and Communities Agency, Network Rail, Greater Lincolnshire LEP and £28.5 million developer contributions.
The Growth and Housing Fund is a national Highways England initiative to support improvements to the strategic road network that will help create thousands of jobs and homes.
Ian Parsons, who is leading on the initiative at Highways England, said: “Today’s funding is a boost for growth that will help kick-start a major regeneration scheme as well as alleviate congestion, meaning better journeys for motorists.
“New homes and workspaces bring jobs and prosperity to communities. Our job is to ensure the road system supports that prosperity by funding additional road capacity to serve significant new developments.
“We will continue to use our Growth and Housing Fund and work with a range of local stakeholders to unlock further development sites around the country.”
Ursula Lidbetter MBE, Chair of the Greater Lincolnshire Local Enterprise Partnership, said: “The Greater Lincolnshire LEP is already contributing £28 million of Growth Deal funding to the wider scheme, and confirmation of this £5 million investment by Highways England via the Growth and Housing Fund towards the A1 junction is extremely good news.
“These improvements will enable significant new housing and employment, will address congestion issues and will contribute to economic growth across Greater Lincolnshire and beyond.”