Engineers have started to construct the 300m section of track for the scheme which is being funded by Burnley Borough Council and Network Rail.
The scheme involves a new section of track linking Todmorden to Burnley. There will also be a new junction near to Todmorden station.
Burnley Council leader Julie Cooper said: "It's great to see progress being made on the new Todmorden Curve. This 300 metre stretch of track will have a massive positive impact on the future of our borough, providing residents with a direct rail link to Manchester and helping to boost our local economy by attracting new people and businesses into our borough.
"Work on the track is going ahead; now we have to continue to work on the issue of making sure trains are available to run on it as soon as possible after it's completed."
Dyan Crowther, route managing director for Network Rail, said: "With more passengers and more journeys being made than ever before, demand for rail is booming and we have big plans to improve the railway in the north of England through the Northern Hub and the refurbishment of Manchester Victoria.
"The Todmorden curve will provide a boost for the Lancashire economy by unlocking the railway into Burnley."
Regional Growth Fund cash was awarded in 2011 for the project from a bid submitted by Burnley Council, Barnfield Investment Properties, Network Rail and Lancashire County Council.