The 33-home scheme is the third phase of a major regeneration project for the area and will create 10 houses and 24 flats for affordable rent in Firrhill Park.
It is set to be completed in January 2011.
Lovell has also worked on the first and second phases of the Oxgangs regeneration.
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The £10.1 million second phase of the programme is due to be completed in February 2010.
Ewan Fraser, chief executive, Dunedin Canmore Group, said: "The regeneration of Oxgangs has been a priority for the Group, construction by Lovell has seen a total transformation of the area.
"The three multi-storey blocks are being replaced with a mix of flats and family housing all designed with input from both the Group and the local steering group. When phase two completes there will also be offices, shops and a nursery alongside a new lochan (pond)."
"The regeneration of Oxgangs is bringing about real improvements," added Lovell regional director Alan Taylor. "We are pleased to be continuing our partnership with Dunedin Canmore to help deliver the third phase of the new housing programme."
(GK/BMcC)
