The new road is made up of the longest tunnels and bridge ever built by Israel. One tunnel, which is about 900 feet long, goes under the Gilo neighborhood in southern Jerusalem. The other tunnel, which is some 3,000 feet long, passes under Beit Jala, a Palestinian village near Bethlehem.
A 1,150-foot bridge connects the two tunnels.
Initially begun under the Likud-led government in 1992, construction of the road, which bypasses Palestinian communities, was continued by the following Labor-led government.
Palestinians have strongly opposed the building of bypass roads, and say Israel has expropriated land for the projects.
In addition, dozens of Israeli peace activists protested at the otherwise uneventful dedication.