A £7.2 million contract for the upgrade of the Bulford Road, between Johnston and Tiers Cross, has been awarded to Alun Griffiths (Contractors) Limited.
The scheme is important for carrying road traffic to the county's energy sites and other developments in the vicinity of the Haven waterway.
Currently, Bulford Road is mainly a single track road and it is of poor standard.
The project will lead to the upgrading of 2.7km of the highway and the creation of a 2.7km shared use path.
The project also aims to contribute towards reducing congestion and traffic, particularly heavy lorries, in Milford Haven town centre. It is envisaged that it will support the Milford Haven Regeneration Strategy and support community aspirations by reducing road safety concerns, the county council said.
The project, which has been part-funded by the European Regional Development Fund through the Welsh Government, will create an opportunity for the development of improved pedestrian and cycleway links and better public transport service infrastructure in the town centre.
Pembrokeshire County Council will now work with the contractor on progressing and completing detailed project designs for the scheme.
Site clearance works are already taking place under a separately awarded commission, with main construction work due to start toward late April 2014 and be completed by May 2015.
Councillor Jamie Adams, Leader of Pembrokeshire County Council, said: “It’s great news that we have been able to award the contract for this important link road.
“The improvement is important for the local economy, and also for traffic accessing key energy infrastructure, reducing congestion levels and making journey times quicker and safer.”