The government will give £110 million to Lincolnshire County Council to build the Lincoln Southern Bypass around North Hykeham.
The council has to submit a full business case for the 70% funding of the full £154.458 million project.
Therefore, the council will only have to pay around £44 million towards the full scheme if approved.
Karl McCartney, MP for Lincoln, said: “I am thrilled that we have received such positive news from government regarding this critical but very positive scheme.
“The completion of the North Hykeham relief road will reduce congestion in south Lincoln, Waddington and of course, North Hykeham, whilst providing a full ring road around Lincoln, benefiting everyone who lives, works and visits our city.
“Additionally, this will provide further opportunity by opening up land for development to both the commercial and residential sectors.
“Lincoln has a major part to play in the future economic growth of the county and the East Midlands — it is fantastic to receive such an investment from our Conservative government that I have long campaigned for.”