The existing timber and thatch structure at West Stow, in Suffolk, is "beyond repair".
St Edmundsbury Borough Council is spending Â£20,000 on a replacement, which should take a couple of months to complete.
The reconstructions have been built on the site of a village which was believed to have existed from 420-650.
The site was excavated between 1965 and 1972 and the reconstruction project began with a team of students from Cambridge University in 1973.
Work on the new house has begun with a pit being dug so that its floor will be about a foot (30cm) below ground.
Sarah Broughton, chairwoman of the West Stow Anglo Saxon Village trust, said: "The sunken building that is there now is beyond repair, so the idea is to put the first new building up for 10 years and for people to come along and watch the construction as it goes along.
"West Stow is an experimental archaeological site, so we are experimenting all the time with the construction to see what would have been used 1,500 year ago and what would have succeeded in the sandy soil."
The builders will be using tools, materials and methods believed to have been used in the Anglo-Saxon period.
The timber framework for the new building is due to be raised on Wednesday.
Once the new house is built, the old one will be taken down and research carried out into the rotting process.
It is hoped this will give an insight into how long an Anglo Saxon house would have stayed up and how much material they could have recycled.
A reconstructed Anglo-Saxon village is to get a new house to replace one built 40 years ago.