The works are the first in almost two centuries and will focus on repairing, reinforcing and conserving the structure.
Pilgrims will be able to continue visiting the site while the work is completed.
It is expected to last up to a year.
Clerics from the three denominations that oversee the church - Greek Orthodox, Roman Catholic and Armenian - shook hands in a show of unity next to scaffolding, with work set to begin in about a week.
There have previously been verbal and even physical fights between the denominations near the Holy Sepulchre, so the gesture of unity between their leaders has been seen as a particularly significant development.
Greek-Orthodox Patriarch of Jerusalem, Theophilos III, said the ceremony was a message "that we are delivering what we promised".
