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Principal Debbie Smith said the school, for the past three years, had been participating in a project which developed the bike skills of years 5 and 6 pupils.
During that time, there had been a significant increase in the number of children biking to school, so it was decided an area of the playground that needed to be developed, should be turned into a bike track.
''We know how effective biking can be for the health, fitness and wellbeing of children.''
Mrs Smith said the first stage of track construction began this week and would be 57m long, with judder bars, humps, slalom, a seesaw and obstacles of graduating difficulty.
The track was expected to cost about $8000, and would be paved with compacted lime chips.
The second stage, a further 57m of track, would be added behind the adventure playground, but it was not certain when it would be completed.
''It depends on funding,'' she said.
Bike On New Zealand trustee Paul McArdle visited the school this week to provide advice on how to make the dream a reality.
He said bike tracks had already been established at schools across the North Island, in Christchurch and in Invercargill, but he believed Musselburgh School would be the first in Otago to have a bike track on school grounds.
''We hope that once this first school puts in this track and things are up and run-ning, that other schools in Dunedin and Otago will come have a look at it and look to do something similar.
''It will be an example and an inspiration to other schools.''
The trust had helped more than 35 schools across the country set up their own tracks, in a bid to get children riding bikes regularly.
Mr McArdle said it was important because in 1990, New Zealand primary school children were biking an average of 28 minutes a week.
Today, it was less than 5 minutes a week, and many children never rode a bike.
He believed the best and most cost-effective way to reverse the trend was by helping schools implement the trust's Bikes in Schools package of bikes, helmets, tracks, bike storage and cycle skills training, all within the school.
The documented outcomes were simple: increased health, fitness, skills, safety, confidence and self-esteem, he said.