Work on the pentagon-shaped roundabout should begin next year and aims to reduce the likelihood of crashes at the intersection of State Highway 6 and State Highway 84.
Cars collide with alarming regularity at the intersection, also known as "Vet Corner".
Regional relationships director James Caygill said the roundabout would improve safety "for all road users, including pedestrians and people on bikes".
"This project is part of our Road to Zero Safe Infrastructure Programme which is being delivered across New Zealand.
"Data between 2011 and 2020 shows one person was seriously injured at the intersection, 18 were left with minor injuries and there were 21 crashes which resulted in no significant injuries.
The improvement will make turning from nearby Riverbank Rd on to SH84 safer for motorists and cyclists.
The fifth leg off the roundabout will direct traffic into a future development by Mt Iron Junction Ltd.
Queenstown Lakes deputy mayor and Wanaka resident Calum MacLeod was "absolutely delighted".
"I travel through that intersection multiple times daily and I would suggest every fifth time I come through I see someone doing something stupid. It is only a matter of time before someone does do something silly and fatal," Cr MacLeod said.
About 15 years ago, before Cr MacLeod was elected, he unsuccessfully applied for resource consent to move his business, Cinema Paradiso, to Mount Iron.
One of the issues then was access to the cinema from the awkward intersection.
Talk about a roundabout died away when the cinema was relocated to Brownston St instead.
Last year, Steve Shikker’s company Mt Iron Junction Ltd gained resource consent for a mixed-use development on the other side of the highway, right under Mount Iron.
However, the project has not started because there is a condition that Waka Kotahi must build a roundabout first.
Waka Kotahi NZ Transport Agency has been building its business case since 2020 but it has not been clear — until Friday — when it would go ahead.
Principal project manager Brendon French expected construction to start early next year.
