Planning work is underway for the intersection of Hickory Street and Waterfall Way in Dorrigo with samples of the road being collected and services being located.
Member for Oxley Melinda Pavey said the upgrade would form part of a $50 million package of work on Waterfall Way.
"This intersection is not currently designed as a roundabout but many motorists use it like one, which can be dangerous at times," Mrs Pavey said.
"This project will improve safety at the intersection by installing a formal roundabout to make it easier for vehicles, including heavy vehicles, to use it.
"The upgrade will also make it safer for the many pedestrians who cross at this location.
"Most importantly, the cenotaph will be retained as part of the project."
Transport for NSW is working closely with Bellingen Shire Council to finalise the concept design for the intersection upgrade.
Early planning is also underway for the rest of the $50 million upgrade package for Waterfall Way and Dorrigo town centre, and the community will have the opportunity to provide feedback early in 2020.
Work on the intersection upgrade is expected to start in the New Year.