Site preparations for the project, which was first mooted in the 1960s to cater for the town's growth by diverting heavy traffic from its lakefront centre, are now expected to start before Christmas.
That follows the district council's acceptance of a $97.4 million tender from Fulton Hogan, which intends starting main earthworks along the 16km route in about March.
The rest of the project cost, 76.5 per cent of which will be carried by Land Transport NZ and the balance by the council, includes land purchases and initial design.
Taupo Mayor Rick Cooper said Fulton's bid was the lowest of three, yet offered a "superior, workable and innovative design."
"The best news for council and our community is that the tender price falls within the budget for the project despite recent big increases in fuel, steel and plastic."
An added bonus was the company's intention to use local subcontractors during the project's four-year term.
Instead of turning right where State Highway 1 now joins the Rotorua-Taupo route, southbound traffic will in future head straight towards the Waikato River via a 430m viaduct over the Wairakei geothermal field next to a Contact Energy power station.
Mr Boyle said the viaduct and the river bridge would be about 400m apart, as building a continuous structure would be too expensive.
The bypass, which will be designated part of SH1, will include roundabouts at Wairakei and the new road's intersection with the Napier-Taupo highway and two smaller bridges at interchanges with Centennial Drive and Broadlands Rd.