BMD Constructions Pty Ltd will undertake the first step in the upgrade, which involves the removal of the level crossing on the Cranbourne line in Lyndhurst with a six-lane bridge to be built over the railway line. Marriott Boulevard to the South Gippsland Highway will also be duplicated.
New paths and improved lighting for pedestrians and cyclists will also be constructed, which will improve connection to and from the Merinda Park train station.
Construction is expected to commence by the end of the year.
The second stage of works will include the duplication of Thompsons Road from Dandenong-Frankston Road to Marriott Boulevard and from Narre Warren-Cranbourne Road to Berwick Cranbourne Road.
10 kilometres of new shared path for cyclists and pedestrians will also be constructed along Thompsons Road, including 8.2 kilometres on the north side, and 1.5 kilometres on the south between Western Port Highway and Evans Road.
The upgrade will include replacing the roundabout at the Western Port Highway with traffic lights to improve traffic flow.
Stage 1 will be completed in 2018, with the full project finished before mid 2019.