Three Rivers District Council and development partner Countryside Properties signed a deal to regenerate the estate with around 500 new homes.
A market square could also be introduced and better links will be created to Carpenders Park station.
Three Rivers District Council selected Countryside Properties as preferred bidder for the project last May and has since brought Home Group on board to deliver affordable housing.
Ann Shaw, Leader of the Council said: “The Council is very pleased to have formally entered into contract with Countryside and Home Group and we are very much looking forward to working in collaboration to deliver the new high quality homes and shops that South Oxhey needs.”
Richard Cherry, chief executive of Countryside Properties’ partnerships division, said: “We have 30 years’ experience in local authority estate regeneration.
“Our vision is to create an integrated and well-designed new neighbourhood with high quality housing for South Oxhey, and we will do that in close partnership with the local community.”