Representatives from Monmouthshire County Council, Lovell, Melin Homes and Candleston came together for a ground breaking ceremony in Portskewett.
The £45M development of the Crick Road site will offer 201 open market homes and 68 affordable homes.
The development will also feature Severn View Park, an innovative and inclusive 32-bedroom care home, designed to replace the Severn View home in Chepstow.
Council Leader, Cllr. Mary Ann Brocklesby said: “This project is an exciting step forward, in providing much-needed housing in tandem with the needs of some of the county’s more vulnerable residents. By working in partnership with these leading organisations this development will be delivered with all consideration to the local environment and the local community, and will provide a sustainable place for people to live, work and call home.”