Early work starts on March 26 with construction to take place from April 28, weather permitting.

The work will happen between 7am and 5pm Monday to Thursday, and 7am to 3pm on Fridays.

Member for South Coast Shelley Hancock said increased traffic had lead to more congestion on nearby roads, and the crash history of the intersection was taken into consideration.

"As more people visit and move to the area, we're seeing traffic increase, which is having flow-on affects to nearby roads," Mrs Hancock said.

"Feedback on upgrades to the intersection support the installation of a roundabout which will improve road safety and traffic flow and reduce congestion.

"Keeping South Coast communities connected is a key priority and the new roundabout will provide road users a safer and more efficient route through the region."

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There were 19 crashes at the intersection over the five years to March 2019.

Minister for Regional Transport and Roads Paul Toole said the NSW Government was committed to delivering the best infrastructure solution for local communities.

"The Bay and Basin area continues to grow, and we are committed to maintaining the highway while upgrades to the Princes Highway south of Nowra are underway," Mr Toole said.

"Projects like this one will support the growth of local economies by improving commuter traffic journey times, as well as supporting the growing freight task."

The $5 million project is being funded through the NSW Government's Safer Roads program.

During early works, southbound traffic turning into Island Point Road and southbound traffic turning out of Island Point Road may experience brief delays.