Key elements of the plan include making it a signalised roundabout with signalised pedestrian and cycle crossing facilities as well as creating segregated cycle facilities.
There will also be an extension to the existing southbound bus lane on Otley Road and reduced speed limits from 70mph on the A6120 Ring Road, between King Lane and Lawnswood roundabout.
The council also said it needs to create “attractive alternatives” to driving such as more reliable bus routes.
Peter Carlill, deputy chair of the WYCA, added: “By improving crossings, reducing vehicle speeds, and introducing cycle lanes, we’re helping ensure Lawnswood junction is a place where everyone can travel easily and safely.
“It’s an important step towards a greener, more accessible, and better-connected region.”