The most notorious part of southeast Queensland's M1 motorway will receive an upgrade after the state and federal governments finally reached a funding agreement.

Construction of a $190 million upgrade at the M1 and Gateway motorway merge at Underwood, a major bottleneck on the way from Brisbane to Gold Coast, has begun.

Federal Minister for Urban Infrastructure Paul Fletcher (left) , Queensland Public Works Minister Mick de Brenni (middle), and Queensland Premier Annastacia Palaszczuk (right) announcing that the contract for the M1 and M3 upgrade between Eight Mile Plains and Rochedale South has been awarded.

The Turnbull government has committed to funding 60 per cent of the project - up to $115 million - after reaching a compromise with the state Labor government, which had demanded an 80-20 split.

Amid a prolonged stalemate, the Commonwealth had insisted the project would be jointly funded on a 50-50 basis.