The dual carriageway will connect the Newport Southern Distributor road with junction 23A of the M4 and will involve improving and resurfacing of the three-mile stretch of highway.
Welsh Government minister Carl Sargeant, who is responsible for transport, said the improvement works would help ease congestion on the M4 around Newport.
Persimmon has started work on the first phase of a 4,000 home development at a former steelworks site near Newport, known as the Glan Llyn development, late last year.
St Modwen’s plans for the site are likely to take around 20 years to complete and are set to eventually include a school, shops and leisure facilities.