It will be next to a revamped BMX track at Seddon Park.
Work has started on an upgrade of the BMX track, which is being realigned.
Both are expected to be ready by the end of this year.
Dunedin City Council parks and recreation group manager Scott MacLean said the work would complement other facilities at Seddon Park, including the velodrome.
"The community asked us to upgrade the BMX track at Seddon Park, as it is in poor condition, and wanted to add a pump track to other cycling facilities at the park," Mr MacLean said.
"This work will create a bike hub in Mosgiel where different age groups and skill levels can play on their bikes at the same park."
A pump track is a looping trail of berms, banked turns and rollers for cycling, skating, skateboarding and scootering, and riders make use of momentum.
It will be the first permanent pump track installed by the city council, after consultation about play spaces.
More are planned and they are considered suitable for younger children, while the BMX track would be just for bikes.
"The pump track will be sealed so bikes, scooters and skateboards can use it, and we need to realign the BMX track to make room for the pump track," Mr MacLean said.
"The BMX track will cater for practice, training and family fun."
It is expected landscaping will be completed early next year.
The cost of the work is about $736,000.
