"Safety is our top transport priority, and these investments will mean a safer journey between Tarukenga and Ngongotahā, where too many people have been hurt in recent years," Coffey said.
Rotorua mayor Steve Chadwick said the announcement was great news.
"We've all been calling for improvements to this key intersection for some time now to alleviate congestion and I look forward to seeing the detail and timing for this project.
"Good roads are a key component of enabling housing development to progress and we are advocating for this as part of the work under way on solutions to address Rotorua's critical housing shortage."
The $12 billion New Zealand Upgrade Programme includes $6.8b on transport infrastructure for the six main growth areas in New Zealand, including the Bay of Plenty. The North Island investment is about $62m with seven projects selected from Northland, the Bay of Plenty, Hawke's Bay and Taranaki.
Other roading projects for the region include a four-lane Tauranga Northern Link and upgrades on SH2, and a new roundabout at the intersection of SH1 and SH29.