The Stad tunnel will bypass the Stad peninsula, a storm-battered area in western Norway, and will be a mile long and 36 metres wide.
The Stadhavet Sea is the most exposed and dangerous area along the coast of Norway.
Norwegian transport minister Ketil Solvik-Olsen said: “The Stad tunnel for boats will finally be built.
“The government is now ensuring a safer and more reliable passage of the most dangerous and harsh waters for the transport of goods along the Norwegian coasts.”
Fierce winds off the peninsular cause major hazards to shipping in the North Sea and many ships are forced to wait for storms to abate before they are able to continue journeys.
Talented sailors such as the Vikings preferred to avoid the waters and transported their boats by land.
Tunnels for boats have been built in other parts of the world, such as the Canal du Midi in France.
However, the Stad tunnel will be the first to accommodate ships of up to 16,000 tonnes for freight transport and passengers, including the iconic Bergen-Kirkenes Coastal Express, which connects the Nordic nation’s south and north.
Work on the tunnel will start in 2019, with the cost of the project estimated at about £253m.
It is expected to take between three and four years to build.