The site, at Germany Beck in Fulford, was flooded over Christmas and the Conservative MP for the area, Julian Sturdy, had backed a campaign to reconsider the scheme.
Persimmon Homes said the Â£125m scheme would minimise the flood risk and offered "great benefits" to the area.
Work will begin with construction of a new road junction off the A19.
The scheme has been the subject of criticism due to its size and the risk of flooding but was approved by the City of York Council in 2007.
Campaigners opposed to the scheme also believed the land is on the site of the 1066 Battle of Fulford.
Simon Usher, managing director at Persimmon Homes Yorkshire, said: "This is a major development which will transform the approximately 24 hectare site, not only bringing much-needed new homes to the region, including 227 affordable homes, but also creating more than 120 new job opportunities, with more expected during the life of the project."
Mr Usher said the company would be providing Â£6m for community projects which included highway improvements and a new community sports facility at Fulford School.
The new A19 junction will also see the road raised, which the company said would reduce the likelihood of it flooding in the future.
The water, which will be displaced from the A19, will be stored in a specially created water meadow.
Persimmon also said the design of the development included oversize drainage pipes to store run-off water and reduce the rate at which water enters the public sewers and watercourses.
Work to build more than 600 new homes near York will begin in May, a developer has confirmed.