Corbridge in Northumberland was hit by Storm Desmond in 2015, with more than 70 homes evacuated as the River Tyne reached record levels.
Water drainage near Station Road and Tinklers Bank was now being improved, Northumberland County Council officials said.
Cabinet member Ian Swithenbank said the project was "vital".
"We've been working tirelessly since the severe weather last winter to clean-up and repair roads and infrastructure both in Corbridge and the wider area and this major piece of work will help protect the town in the future," he said.
A new outfall through Tynedale Rugby Club will replace a culvert badly damaged during the storms, the authority said.
Club chief executive Neil Foster said flooding at the ground seemed "insignificant compared to the impact on local residents".
"Hopefully this new surface water drainage system will reduce the risk of future surface water flooding, particularly in Station Road where flooding has historically been a problem," he said.
The work is expected to take up to four months.
Work has started on new flood prevention measures for a repeatedly flooded village.