Blueprint plans are being drafted to overhaul traffic flows in Lye, near Stourbridge, along with a bid for the money to cover the costs from the Government.
Lye Bypass will be made two-way as part of the plans, which will reduce the amount of traffic on High Street improving the air quality, as well as increasing footpaths and cycle routes.
A key feature will be better pedestrian connection from the train station to High Street, while road junctions along the A4036 will be improved.
Dudley Council is working with businesses and Stourbridge MP Suzanne Webb on the bid to the Government’s levelling up fund.
The borough's regeneration boss Councillor Simon Phipps said: "These are ambitious plans for Lye and will see radical changes to the road layout. That will help shoppers and traders and also make the area safer for motorists.
"This is one of a number of bids we are looking at as part of round two of the levelling up fund which, if successful, will see improvements in our town centres."
The plans will also bring forward four brownfield or former industrial sites to deliver new homes and new car park provision.
The council's bid will be submitted next month and the outcome is likely to be announced in the autumn.
The levelling up fund is a government initiative to invest in infrastructure programmes including transport schemes, urban regeneration projects and cultural assets.
A bid is also being drawn up for Halesowen which includes demolishing the Pool Road multi-storey car park and building a new college campus to bring students into the town. There are also proposals for additional car parking and improved cycling and walking routes.
The schemes will be discussed by the cabinet next Monday.