The souterrain, an underground passage with chambers, was uncovered during road improvement works on the Caha Mountains on the West Cork-Kerry border.
Unusually the structure had been tunnelled into rock overlooking the magnificent Sheen Valley.
The site is on the scenic mountain route near Bonane, between Kenmare and Glengarriff on the national secondary road N71.
Located close to famed tunnels, cut out from rock and used by vehicles, archaeologists said the site is to be sealed and preserved.
James Eogan, a senior archaeologist with the National Roads Authority, yesterday said a digger driver made the discovery.
He said the man knew he had come across something unusual when “a hole in the ground opened up before him” as a ditch was being removed.
“The roadworks had only clipped the end of the souterrain which had remained in good condition. The chamber section is actually running away from the road and into a farm,” Mr Eogan said.
“There are souterrains in many parts of the country and this was the 870th recorded in Kerry, alone.
“This one is interesting as people had not previously known about it and it shows there was a settlement in the area in the 8th to 10th century period.
“It is also significant in that it had tunnelled into rock as miners might do which was most unusual — as souterrains generally consist of dry stone walls with lintels running across them and earth on top,” Mr Eogan added.
Souterrains had been used as places of temporary refuge or for food storage.
The National Roads Authority and Kerry County Council are consulting with the National Monuments Service about the find.
The souterrain, about 15m long and 1.5m high, is at Releagh in the archaeologically rich Bonane area.
Mr Eogan said the entrance will be blocked and the site preserved. He said there will be no public access permitted.
The souterrain is close to the edge of the roadway. The roads’ authority said the works on the important tourist route between Kerry and West Cork will not be delayed.