The 1600-megawatt facility's construction start ceremony at 10am local time in Lively Grove was attended by hundreds and featured speeches by state and regional lawmakers.
The campus, expected to be running by 2011 or 2012, will have a carbon dioxide emission rate about 15% lower than typical coal-fired plants in the US.
According to Indiana Municipal Power Agency chief Raj Rao the plant will achieve "high efficiencies and low emissions that are far superior to America's current generating fleet, benefiting more than 1.7 million Midwest families".
While an appeal is still pending with regards to its air permit, all other major approvals have been obtained for Prairie State, which will create as many as 450 permanent jobs and inject nearly $100 million each year into the regional economy.
Early last month, Peabody said the new plant would supply 125MW to the Southern Illinois Power Cooperative, the equivalent of powering up 1.7 million families in 24 counties surrounding the station.
SIPC's group includes American Municipal Power-Ohio; Illinois Municipal Electric Agency; Indiana Municipal Power Agency; Kentucky Municipal Power Agency; Missouri Joint Municipal Electric Utility Commission; Northern Illinois Municipal Power Agency; and Prairie Power.