Built to bypass the Stad peninsula, a storm-swept area in western Norway, the Stad ship tunnel will be 1.7 kilometres (one mile) long and 36 meters wide, making journeys safer.
"The Stad tunnel for boats will finally be built," said Norwegian Transport Minister Ketil Solvik-Olsen, presenting a comprehensive transport plan for the period 2018-2029.
"The government is now ensuring a safer and more reliable passage of the most dangerous and harsh waters for the transport of goods along the Norwegian coasts," he said in a statement.
The North Sea is roughed up by fierce winds off the peninsula and many ships wait for storms to abate before continuing their journey.
Even the Vikings, who were talented sailors, preferred to avoid the waters, instead transporting their boats by land.
Tunnels for boats exist in other parts of the world, such as the Canal du Midi in France, but the Stad tunnel will be the first to accommodate ships up to 16,000 tonnes for freight transport and passengers, including the iconic Bergen-Kirkenes Coastal Express, which connects the Nordic nation's south and north.
The project is estimated to cost 2.7 billion kroner (295 million euros, $315 million).
It should take between three and four years to build, with work to begin in the first half of the multi-year plan, the government said.