The tunnel will run beneath the Strait of Gibraltar, which separates Spain from North Africa. The site was chosen because the Mediterranean at that point is only around 300 metres deep, a ministry statement said.
The project for a fixed link, first mooted in 1980, was revived at a summit in Morocco earlier this month aimed at healing relations between Madrid and Rabat, the statement said.
It comes less than two years after Morocco and Spain nearly came to blows over the tiny uninhabited Mediterranean islet of Perejil in July 2002.
Rabat claims the rocky outcrop, only a few hundred metres from its coast, as well as Spain's North African enclaves of Ceuta and Melilla.
A military clash was narrowly avoided when Spanish troops landed by helicopter to eject a handful of Moroccan soldiers who had set up a monitoring post on Perejil.
The project is still in its early stages. Morocco and Spain have agreed a three-year working plan with a budget of 27 million euros ($30 million), over four-fifths of which will be spent on seismic testing to determine the best drilling route.
Plans are to locate the Spanish mouth of the tunnel at Punta Palomas some 40 km west of Gibraltar and the Moroccan end at Punta Malabata near Tangiers.