The project paves the way for the East Leeds Extension, which is expected to see 5,000 new houses built.
As well as improvements to roundabouts and junctions across northeast Leeds, the project will also improve cycleways, footpaths and drainage systems.
The construction of the scheme’s initial two phases (Outer Ring Road Junction Improvements on the A61 corridor and at the Roundhay Park Lane Junction and design development of the main ELOR route) will be carried out by Balfour Beatty.
Carillion had originally been selected for the contract, before it collapsed into insolvency at the start of the year.
A third phase proposed to start in late 2019 if all statutory approvals are obtained.
Leeds City Council has worked with West Yorkshire Combined Authority (WYCA) to arrange for funding from a range of sources to be in place, with Phases One and Two expected to cost around £16m.
Richard Lewis, Leeds City Council executive member for regeneration, transport and planning, said: “The East Leeds Orbital Route is the biggest infrastructure project undertaken by Leeds City Council for fifty years, since the completion of the Leeds Inner Ring Road. This scheme will ease congestion in existing residential areas across Cross Gates, Seacroft, Whitkirk and also play a key role in the growth plans for the city for years to come.”