Prime Minister Hun Sen announced the start of the project, intended to reduce Phnom Penh's increasing traffic problems, at a ceremony opening another new bridge at the intersection.
"It is will be the first overpass bridge of Cambodia," Hun Sen said at the ceremony.
Officials said construction of the 308-metre (1,010-foot) overpass would cost more than six million dollars and would be finished within one year.
The premier said Phnom Penh had changed from "ghost city, a city that has no people, and a shocked city, into a vivid city."
All residents of Phnom Penh were forced into the countryside during the 1975 to 1979 Khmer Rouge regime, as the hardline communists enslaved the nation on collective farms.
During Wednesday's ceremony, Hun Sen also called on the people to respect traffic laws, saying that doing so meant they "respect their own lives."
Traffic fatalities have more than doubled in Cambodia over the past five years, becoming the second-biggest killer behind HIV/AIDS.
Better roads and more vehicles have contributed heavily to this toll, but bad driving is the main cause behind most accidents, police say.
Cambodia has finally begun to emerge from decades of civil conflict, but has been hit with gridlock as well as a building boom that has begun to change radically the face of its once-sleepy capital.
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