Around 750 extra car spaces are being created near Emu Plains railway station, off Old Bathurst Road.
The Federal Government has allocated $15 million to the project from its Urban Congestion Fund.
A new roundabout will be built at the intersection of Old Bathurst Road and Smith Street to allow for entry and exit to the car park.
Landscaping will be included as will a vegetated drainage channel throughout the car park.
Lindsay MP Melissa McIntosh said that increasing parking at the station would take hundreds of cars off the road.
"This project will ease congestion and improve safety on our roads by enabling more people to access our local public transport network," Ms McIntosh said.
"Prior to COVID, the existing parking at the station was usually full as early as 7am on weekdays. The increased capacity will be a much-needed boost for our community.
"This will help make the daily commute quicker and safer, helping local people spend more time building their business or at home with their family rather than stuck in traffic."
State Penrith MP Stuart Ayres said a new footbridge over Old Bathurst Road was being installed as part of the project, to provide safe and direct pedestrian access.
The commuter car park is expected to be completed in late 2022.
For more details on the project visit www.transport.nsw.gov.au/emuplains.