Morpeth in Northumberland has been repeatedly hit by flooding and in 2008, more than 1,000 homes in the town were flooded.
This £26m project, which received £12m funding from Northumberland County Council, is the first time such a scheme has been delivered by the Environment Agency and a council in the region.
Construction work on the project began in 2013 and has included a new flood wall and embankment along the riverside, comprising three new flood gates and repairs/improvements to existing defences.
The Environment Agency has described the project as one of the largest of its kind ever constructed and has the capacity to store up to 1.4 million cubic metres of water when river levels rise.
The scheme has also created 42 acres (17 hectares) of new habitat for local wildlife and 3,500 endangered white-clawed crayfish have been relocated upstream of the River Wansbeck.
Sir Philip Dilley, Environment Agency chairman, said: "With one in six people at risk of flooding in England, flood schemes like Morpeth have a key role to play in protecting people and property, and provide a valuable boost to the local economy.
"The success of this scheme is down to the way it has been developed in collaboration with others. In particular, the funding from Northumberland County Council is among the largest contributions received under the partnership funding regime."
He said £2.3bn will be invested over the next six years across England, to reduce flood risk to 300,000 properties.