The A66 runs from the east of Middlesbrough in North Yorkshire to Workington in Cumbria.
The proposed upgrades include five bypasses, the widening of two sections of the existing route so the road is fully dualled, and a roundabout underpass.
Highways England described the project as “one of the largest and most important highways investments in the north of England”.
It said the changes are expected to reduce congestion, increase safety, and provide walking and cycling options along parts of the existing A66 route.
The government announced its commitment to fund the project as part of its second Roads Investment Strategy, which was published alongside the Budget statement earlier this year.
Consultation on possible options took place between May and July of last year.
Highways England said further consultation will now take place on the design of the preferred options before a development consent order (DCO) application is submitted to the Planning Inspectorate.
The agency has not provided a date for submission of the DCO application but said that it expects construction to start in 2024/25.
The preferred options are:
an underpass through the Kemplay Bank roundabout;
a southern bypass from Whinfell Park Farm to Swine Gill;
a bypass to the north of Kirkby Thore;
the northernmost of two bypass options of Crackenthorpe;
the widening of the carriageway between Café 66 and Wildboar Hill for eastbound traffic and the construction of a new westbound carriageway directly to the south;
the conversion of the existing Bowes bypass to a dual carriageway;
a southern bypass between Cross Lanes and Rokeby;
a northern bypass between Stephen Bank and Carkin Moor.
Peter Molyneux, major roads director at public-private body Transport for the North, said: “Upgrades to the A66 are absolutely essential to improve connections and experience, as the people that regularly use it will attest.
“The green light for this project is another piece of the jigsaw in our 30-year mission to give the North the quality connections it needs. The key now will be looking at ways to get on site as quickly as possible to deliver the benefits.”
In a statement, Highways England said: "The A66 is both a nationally important road, linking the M6 at Penrith in Cumbria with the A1(M) at Scotch Corner in North Yorkshire, and a key regional route.
"As well as benefiting local people the upgrade will support tourism and freight traffic, improving connections between ports in Scotland and Northern Ireland and those in England at Hull and Felixstowe."
According to the government, the project will cost £1 billion.
Last month, the High Court dismissed a legal challenge to works to be carried out in relation to Highways England’s plans for a new road tunnel near Stonehenge.