Almost 100 new homes will be built on the former Smithfield Primary School site in Middlefield.
The two-phase Smithfield scheme is being delivered by CHAP Construction and has been designed by North-east firm Lippe Architects.
It will also include open green spaces with access to a revamped play park opposite the site.
Phase One (Provost Rust Drive) will offer 12 semidetached homes while Phase Two (Smithfield Drive and Clarke Street) will comprise a mix of 30 semidetached properties and 57 one/two bedroom apartments.
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The development is part of the local authority's plans to create thousands of new, affordable homes within the next two years.
Council Leader Jenny Laing said: "This flagship project will create contemporary, all-purpose homes for residents in our city who are struggling to meet private rents and who are struggling to find suitable accommodation.
"Our firm commitment to investing in our housing portfolio will not just ensure Aberdeen can offer comfortable, modern homes for those seeking to build lives here, it will also rejuvenate existing communities who will benefit from new infrastructure and the regeneration which accompanies such investment."
Jim Young, Construction Director of CHAP Construction, said: "This is a particularly significant project for both CHAP Group and Lippe Architects from several aspects. As long-established local businesses and employers, it carries great significance for our staff.
"However, from the simple perspective that the project will provide a large number of much needed affordable homes in Aberdeen, it is an honour for us to be awarded this construction project."
(LM)
