The scheme, which is expected to cost £150,000, should make the area safer for pedestrians, cyclists – and for disabled visitors using the special facilities at Lakeside holiday centre.
Work started on May 14 and is due to finish by June 10.
Ha
mpshire County Council spokeswoman Diana Leahy said: "The road has been closed to enable the carriageway near the junction with Rails Lane to be completely reconstructed.
"The remainder of the road and the pavements are being resurfaced - the pavements are almost complete.
"A new footpath is being provided along the north side of Fishery Lane near its junction with Rails Lane."
Traffic is being diverted along Marshall Road and St Herman's Road, which are similar in width to Fishery Lane during the work.
The spokeswoman added: "Hampshire County Council is liaising with the recycling centre and the holiday village to find ways to ease difficulties that may arise from large vehicles using the diversion in order to continue to provide a service to those establishments."
The improvements were welcomed by Terry Worrall, chairman of Hayling Community Board, who warned in the Islander in November that the potholes and the narrow, uneven pavements were "an accident waiting to happen."
He said: "Community Board members are glad to see this work under way. I'm sure local residents and visitors will welcome it too."
Mr Worrall added: "We have Ted to thank for this," – referring to Ted Gale, who is standing down after 12 years as Hayling's county councillor on June 4.
Cllr Gale pressed for full reconstruction of part of the road, rather than the usual resurfacing.
He said: "This is the icing on the cake. I am very pleased about it."
Residents in the area have also campaigned for the improvements.
Dennis Hankins was badly injured in 2008 after tripping in a pothole in Fishery Lane and hitting his head on the pavement.
His letter writing campaign, which started back in the early 1990s has finally brought a resolution to on-going problems.
