Welsh Assembly Government economic development and transport minister Andrew Davies said that an extra section of the M4 will be developed between Magor and Castleton, either side of Newport. The announcement is a key plank of an £8 billion 15-year transport programme.
The assembly hopes that construction will start in the next five years, "subject to the completion of the normal statutory processes". The route could become the UK's second major toll road.
Additional capacity on the M4 in south-east Wales is "essential to reduce congestion along this strategic gateway and to remove obstacles to greater prosperity along the length of the M4 corridor," said Davies.
The M4 around Newport is one of Wales's busiest stretches of motorway.
But it is only two lanes wide and often becomes gridlocked during peak hours. The route will run through the former Llanwern steelworks site.
This "will deliver the lowest possible long-term environmental impact, consistent with economic and social objectives", added Davies.
Cardiff Chamber of Commerce chief executive Helen Conway said: "A revival of plans for the M4 relief road was desperately needed. The south Wales economy drives the national economy and congestion is threatening to strangle growth." But environmental groups replied that the motorway will lead to greater traffic.