Three pedestrian crossings will also be raised in Main South Rd, as part of a $2.4 million road safety project happening in stages from mid-March.
Construction of the roundabout, at the intersection of Main South Rd and Church St, is due to start in August and the overall project is expected to be completed in October.
Dunedin City Council transport group manager Jeanine Benson said the council would first repair, replace or upgrade critical underground infrastructure, including sewerage and water pipes, kerbs and footpaths in the vicinity of the planned roundabout.
"This will avoid us having to dig this area up again in the near future," Ms Benson said.
The need for the roadworks had been identified with the Greater Green Island Community Network and there was then consultation with the community, she said.
The work is expected to provide a more suitable environment for a growing community.
Ms Benson said the roundabout would deal with safety concerns, such as a confusing roads layout and motorists speeding or cutting the corner.
"The roundabout design includes raised crossings at each exit, encouraging slower vehicle speeds and safer areas for pedestrians to cross."
Raising the other three pedestrian crossings in Main South Rd would improve pedestrian safety by slowing down traffic and increasing visibility, she said.
Ms Benson said the council and its contractor, Fulton Hogan, would strive to keep disruption to a minimum.
There would be one-way traffic between Jenkins St and Church St from mid-March, flowing towards Dunedin.
Creation of the roundabout would result in a full road closure for about a month from mid-August.
Detours would be in place.
