A joint funding agreement will see the construction of a 7.7km tunnel dubbed the ‘Sydney Bypass’.

The massive new project should take up to 7000 trucks a day off congested public highways, connecting the F3 freeway and M2 motorway at a cost of around a billion dollars.

Funding will come from both the State and Federal levels, each having committed $405 million to the mammoth project over the weekend.

The newly-reached agreement moves planning into its third and final stage, embarking on an unsolicited proposals process, the final plan should be ready by mid-2014.

NSW Roads Minister Duncan Gay said it was a good example of the State and Federal Governments working well together.

"On Monday I'll be able to talk to industry and get the appropriate bids in to get something to happen," Mr Gay said, “the only barrier is not getting tenders within the price range."

Mr Gay says the road will help reduce congestion in Sydney and move freight across NSW.