Work on the Backhill Tunnel, which has been shut to the public for many years, will begin in the summer.
It is hoped it will reduce the number of vehicles on nearby roads and help to encourage economic development in the area.
Oxfordshire County Council said the work will take about four months.
Councillor David Nimmo Smith, cabinet member for transport, said there were also plans to create 16,000 additional homes and 20,000 jobs in the area by 2031.
He added: "8,500 of these jobs will be provided at Harwell Oxford and Milton Park as part of the Enterprise Zone."
A disused rail tunnel is to undergo a £1.4m revamp to provide pedestrians and cyclists a link between Didcot and Milton Park.