Access will be from a new roundabout off Charlton Road, both for construction vehicles and access when the development is completed.
As part of the deal, the existing playground off Holmoak Road will be increased by four times its current size and a financial contribution will made to the Woodland Trust to improve facilities for people using Abbots Wood to the east of the site.
The money will be used to fund the council’s capital programme, which includes investment in highways, affordable housing and school buildings.
Councillor David Bellotti, Cabinet Member for Community Resources, said today: “New homes on this site are part of Bath & North East Somerset Council’s plan to rejuvenate the town.
“Together with the £34 million regeneration of Keynsham town centre and redevelopment of Somerdale, the council and its partners are supporting a town of new opportunities for people living here and their families.
“The new homes will also bring a noticeably improved playground facility and better pathways and facilities for users of Abbots Wood. We understand that Barratt Homes intend to submit a planning application in early 2014.”