Flooding has affected the town in recent years and shut its high school, damaged bridges, flooded fields and closed the nearby railway line.
The flood protection scheme will involve building a channel to divert water into Loch Gynack and prevent it from entering the Gynack Burn.
The Gynack Burn runs through the middle of Kingussie.
Plans for a flood alleviation project for Kingussie have been approved by the Cairngorms National Park Authority.