The £5m HCA deal to complete the bypass opens the way for Henry Boot developer Hallam Land Management to advance plans for a massive housing scheme in the area.
Now this agreement is in place, preliminary site survey work for the bypass will get underway in the next few weeks with tenders expected to be invited later this year.
The 2.2km Northern Link is anticipated to be complete by 2015.
When complete the second phase of the Bedford bypass will allow 1,200 new homes, including 360 affordable dwellings to be constructed due to the increased infrastructure capacity.
It will also trigger construction of a new employment park providing 650 new jobs and a major county park.
Steve Collins, Head of Area for the HCA said, “We are pleased to be able to provide funding for this scheme which will bring so many benefits to Bedford Borough.
“Having been involved with the first phase of the bypass and seeing the difference it has made to the area I am confident that this northern link will be just as successful.”
The first phase of the bypass between the A421 and the A428 was completed two years ago, giving greater accessibility to the area through improved traffic flow and increased efficiency and safety for journeys.