The Stafford Brooks Project will target 25 locations alongside the rivers and streams of the town, improving habitats to enable wildlife numbers to grow and providing homes to a wider variety of species.
National Highways is funding the scheme working in partnership with Staffordshire Wildlife Trust (SWT), Stafford Borough Council and the Environment Agency.
To mark the launch of the project, the Mayor of Stafford Borough, Councillor Philip Leason, has planted a rare black poplar tree at land off Fairway, near the River Sow, one of the sites which will benefit from the funding.
Other sites include the SWT owned and managed nature reserves Radford Meadows and Doxey Marshes, a site of special scientific interest that borders the M6.
The project will also encompass Marston Brook, Pearl Brook, Kingston Brook, Rising Brook and many of the habitats close to the Rivers Sow and Penk.
National Highways, which has been upgrading the nearby M6 between Junctions 13 (Stafford) and 15 (Stoke-on-Trent), is funding the project through its Environment and Wellbeing Designated Fund.
Peter Smith, National Highways development and sponsorship director, said: "The riverways and nature reserves of Stafford are some of the town’s most treasured features and can play such an important part in enriching people’s wellbeing.
"At National Highways, our work goes far beyond managing roads, we’re investing in the environment and communities surrounding our network and the Stafford Brooks Project is an example of the difference we can make with designated funding.
"This investment underlines our commitment to reducing the impact of our roads on the environment and supporting biodiversity.
"We appreciate there has been some disruption while we upgraded the M6 but we are able to give something back to the community with projects like Stafford Brooks, the benefits of which will be enjoyed for years to come."
One of the key objectives of the scheme is to extend, restore and create new habitats which could become home to a variety of wildlife including otter, wading birds such as lapwing and snipe and a range of amphibians.
The project will also help create, restore and connect places for wildflowers, trees and wildlife, where the environment has been impacted by activities from previous road building.
David Cadman, head of nature recovery networks for Staffordshire Wildlife Trust, said: "Working with partners, we have the opportunity to make long lasting improvements for the people and wildlife in Stafford.
"Whereas some projects are contained to a small area, this work will benefit multiple locations in town and will link together key places to create a wider network for nature’s recovery.
"Not only will this project improve biodiversity and water quality, it will also help tackle the nature and climate crises as the improvements will increase carbon storage and reduce the risk of flooding."
Under the project plans, floodplains will be restored to increase their ability to store water when river and waterway levels rise.
This will reduce the risk of flooding of nearby homes and businesses alleviating seasonal pressures felt across the town.
Councillor Frances Beatty, cabinet member for economic development and planning at Stafford Borough Council, said: "This is fantastic news. It is a significant investment that will make a huge difference by opening access along our rivers and streams.
"I have no doubt that we will be seeing an array of wildlife and wetland plants establishing themselves once again for people to learn about and enjoy.
"Restoring nature along our water corridors is going to help tackle the climate crisis, contribute greatly to nature recovery and will surely improve our physical and mental health.
"These plans are a great example of how we are working with knowledgeable partners across a range of environmental projects for the benefit of our communities."
Madeleine Gardner, Catchment Coordinator at the Environment Agency, said: "The Stafford Brooks project is a fantastic initiative that will greatly enhance the riverways and wildlife habitats in Staffordshire.
"The Environment Agency has been involved since the initial stages and we have used our evidence base and expertise to help identify suitable sites for improvement.
"We look forward to continued working with the Stafford Brooks Partnership to support delivery of this exciting project."