The N22 Farranfore Killarney Scheme will have to be redesigned.
Plans for the 26-kilometre route were originally drawn up 16 years ago, but were suspended in 2009.
It aimed to ease traffic congestion in Killarney and shorten journey times on the N22 between Cork and Tralee.
Transport Infrastructure Ireland has now allocated half a million euro to Kerry County Council for the project.
The council’s Chief Executive Moira Murrell says, however, that new plans will have to be drawn up as environmental directives and other regulations have come into force since the old plans were developed.