The project stretches from the Severn-Coquet-Thames St intersection north to Orwell St, and, in an unprecedented move, will provide the town with full traffic lights at five key intersections.
The project aims to reduce the number of crashes in central Oamaru.
There are about 20 a year on this section of highway.
Traffic signals at the five key intersections are expected to improve traffic safety, including at the Severn-Coquet-Thames St intersection, the Waitaki district's worst accident spot.
Already, the Boer War monument has been shifted to make way for changes at the intersection.
The contract for the project was awarded to Fulton Hogan in August and work started in early September.
The bulk of the major roadworks is expected to be completed in January.
That will be followed by landscaping, ending in May with the replanting of the Siberian elms in the centre of the street.
These were temporarily removed to a nursery to accommodate the roadworks.
This week, the major work has been concentrated at the Ribble St intersection, including excavating the road for an underground electricity sub-station and removing the roundabout.
Work has also started in reshaping the Severn-Coquet-Thames St intersection, including excavating the highway, new pavement work, modifying the kerbing, raising the intersection on the eastern side and modifying the central median.
Next month, the installation of the traffic lights will be completed and the lights will be tested, and a start will be made on cobblestones between Ribble and Coquet Sts, on the west side of Thames St.
The new traffic signals are expected to be operating by the end of January.
After that, the remaining landscaping will be completed, and there will be a ceremony before Anzac Day to mark the shifting of the Boer War monument.