The move follows years of prolonged protests and legal wrangling, with the Greens -- formerly the governing coalition's junior partner but now in opposition -- securing a halt to the construction in 2021.
In a bid to protect the reserve's rich and rare wildlife and the surrounding environment, the Greens had ordered a review of all new road-building plans by motorway operator Asfinag.
The project, which dates back to the early 2000s, is designed to ease traffic flow east of the capital, Vienna.
It includes the construction of a new expressway junction and a disputed eight-kilometre (five-mile) motorway tunnel under part of the Lobau national park.
Opponents of the project say construction of the tunnel would damage the fragile ecosystem of the Lobau -- which is part of the Danube-Auen National Park, a UNESCO Biosphere Reserve -- fragment natural habitats and undermine Vienna's commitment to more sustainable transport.
Austrian Infrastructure Minister Peter Hanke said on Thursday that the project "including the tunnel solution, is the most efficient way to meet the living and economic requirements" of the Vienna and Lower Austria regions.
He argued that a comprehensive evaluation had shown that there was "no alternative" to the project, which sought to provide "the necessary economic impetus to the region" while "solving the transport challenges".
The total cost of construction is estimated at 2.7 billion euros ($3.17 billion) and "will be entirely financed by Asfinag", the government said.
The construction of the motorway junction is planned for spring 2026.
The project's second phase, which includes the Lobau tunnel and is due to commence in 2030, is still awaiting final approval.
While some politicians and motorists' associations welcomed the decision, the Greens and environmental organisations condemned it.
Greens leader Leonore Gewessler, who had spearheaded the suspension of the project as environment minister at the time, criticised the move as a "decision against nature, future generations and common sense".
Austria's branch of the World Wide Fund for Nature (WWF) said the "environmental and health risks" as well as the high costs "clearly speak against" the Lobau tunnel.
The government has said it still aims to make the country carbon neutral -- balancing greenhouse gas emissions against measures that absorb or eliminate carbon -- by 2040.
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