Smithfield Road and Polding Street roundabout in Smithfield started last week.
The improvement aims to reduce the high rate of collisions involving Smithfield Road and Polding Street eastbound traffic.
There were 52 crashes at the intersection resulting in 17 injuries between January 2007 and December 2011.
Smithfield MP Andrew Rohan said the state government allocated $3 million to Fairfield Council to develop a program of improvement work to reduce crash risk, as well as improving traffic flow at the intersection.
"Roads and Maritime Services approved stage one of the council's plan for work to start immediately," he said.
"Work started last week to change the lane configuration with new line-marking to reduce the number of westbound roundabout lanes.
"Investigations for stage two are continuing."
He said stage two work should be done by December.
"Community members will be kept informed as investigations progress and will be notified by letter in advance of the work."