Venice is covered with water for 200 days every year
The Italian Prime Minister, Silvio Berlusconi, has launched the long-delayed project designed to save Venice from tidal flooding later on Wednesday.
He was present as the foundation stone was laid for the Moses Project - a series of 78 mobile steel barriers to be activated during exceptionally high tides.
The barriers, due to be in place by 2011, will lie on the seabed most of the time, but will be filled with air to create a dam when Venice is threatened.
Venice is magnificent, the pride of all Italy
Prime Minister Silvio Berlusconi
Environmental groups say they are concerned the scheme will damage the fragile eco-system of the Venice lagoon, while some of the city's business leaders say it could hamper maritime traffic.
Venice has sunk around 23cm into the surrounding lagoon during the past 100 years and high waters are submerging the city's streets and piazzas with increasing frequency.
"Venice is magnificent, the pride of all Italy,"
said Mr Berlusconi.
"Attention to saving this patrimony, this marvel, is at the top of the government's concerns."
The $7bn scheme to save the city has been under discussion since 1966, when a record high tide caused major damage to the city.
Several high tides later, in 1973, the Italian Government declared Venice to be a matter of national interest.
But it took another 30 years of studies, rejected proposals and debate before a definite plan of action was agreed.
The steel barriers, up to five metres wide and 28 metres, high will lie on the sea bed to let normal tides in and out.
A tide reaching one metre higher than normal will trigger a reaction, pumping air into the barriers to float them and create a dam more than 1.5 kilometres long.
There are fears that shipowners could decide to skip Venice if they are kept waiting at the flood barriers, jeopardising the city's 18,000 shipping-related jobs.
Port authority head Claudio Boniciolli said he was worried about the impact.
"Boats will have to wait in line, and ship builders will abandon us," he said.
Environmental groups against the scheme have suggested alternative solutions, such as building docks for cruise ships and oil tankers outside the lagoon at Lido island, raising some areas of the city and carrying out work at the lagoon's main outlets to reduce flooding.
Currently, Venice is covered with water for 200 days every year, compared with only seven at the beginning of the 20th Century.
More than 50 high tides were recorded between 1993 and 2002, compared with just five in the 10 years between 1923 and 1932.