The A6 is a key transport route between Belfast and the north-west and the construction of a new dual carriageway will help to reduce journey times and improve road safety.
Subject to future funding, the announcement follows public inquiries into plans to provide around 18.6miles of new dual carriageway from L'Derry to Dungiven, including a dual carriageway bypass of Dungiven.
Minister McIlveen said: "There is no doubt that this scheme represents a significant investment in our economy and will create hundreds of jobs. Businesses too will benefit from improved transport links while the public will enjoy a safer and better journey."
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Sinn Féin MLA Cathal Ó hOisín welcomed the announcement.
He said: "This is a tremendous boost for the entire North West region. The Minister has now announced she has accepted the outcomes of the public inquiry into the scheme and that it will proceed from 2017.
"Not only has the Minister confirmed the 18 miles of dual carriageway between Dungiven and Derry but she also confirmed that the Dungiven bypass may proceed independently of the construction of the rest of the roadway.
"The campaign to have the A6 transformed into a dual carriageway and the creation of a bypass at Dungiven has taken many years but we are now seeing light at the end of the tunnel."
UUP Councillor William McCandless said: "Throughout his time as Transport Minister, Danny Kennedy made great strides in progressing the A6 project. It might be other parties that will cut the tape on the finished projects in the future, but it is a reminder of the successes of the Ulster Unionist Party's time in the Department.
"There is of course the caveat that progress on the next stage is now subject to the availability of funds. Hopefully the Executive will make sure those funds are made available for a project that will so greatly improve connectivity for the people of the North West."
(CD)
