This new section of the A487, backed by the Welsh Assembly, will improve journey times, ease congestion and significantly improve environmental conditions within Porthmadog, Minfford and Tremadog.
The A487 is a vital route for travelling between north and south Wales as well as being a key connection between the towns and villages in the area.
Welsh Deputy First Minister Ieuan Wyn Jones said: "This new by-pass should help ease congestion and shorten travel times between north and south Wales.
"This Assembly Government project that will be a boost not only to Porthmadog and the local economy, but also North Wales contractors who will be working on the road."
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Gwynedd Council Leader, Councillor Dyfed Edwards said the start of works was a "momentous day" for the Porthmadog area.
"I am confident that this vital new road will ease congestion in Tremadog, Porthmadog and Minffordd and help make shoppers and visitors experience to the area a more pleasurable one as well as providing a welcome boost to the local economy."
Jones Bros Managing Director, Huw Jones, said the contract had helped secure jobs for Jones Bros employees, many of whom live in the vicinity of Porthmadog.
"It is providing new opportunities for our employees to develop their skills and experience. It is therefore helping to raise the construction and management skills base of the Welsh workforce," he said.
The new road will provide a more direct route, improved visibility and safer overtaking opportunities.
The contract for the design and construction of the bypass was awarded to a joint venture between Balfour Beatty plc and Jones Bros. of Ruthin in December 2009.
Works are expected to be completed in late 2011.
(PR/BMcC)
