The North Hykeham Relief Road will link the A46 Pennells Roundabout to the Lincoln Eastern Bypass, creating a ring-road around the city.
Balfour Beatty is understood to be in line to design and build the new relief road, which will take around three years to deliver.
Cllr Richard Davies, executive member for highways, said: “I’m incredibly happy to say that the North Hykeham Relief Road has officially been granted planning permission, which means we’re one step closer to a full ring road around Lincoln.
“Now that planning consent’s been granted, our team can formally enter into negotiations with landowners while continuing to prep all of the legal orders needed before construction can start.
“These include compulsory purchase orders granting powers to obtain the land needed for the road and side roads orders granting powers to improve or alter the highway.
“Our current plan is to present these to Highways and Transport Scrutiny Committee in June and then Executive in July, before making them live for public consultation.
“The focus will then be preparing a full business case for DfT before making a start on building the road late next year.”
As part of the project, new roundabouts would be built at South Hykeham Road, Brant Road and Grantham Road.
A number of bridges would also be constructed, including at Station Road and over the River Witham.