Work to construct the £5.8m project to protect Croston, near Chorley, started in March last year and was due to be ready next month.
But the Environment Agency has now confirmed that work is not expected to be finished until August.
It had to be stopped for three months in December, initially because the ground was too wet and then the village was badly hit by flooding on Boxing Day, devastating many homes and businesses.
Work resumed in March, but it meant the date for completion had to be pushed back.
Audra Waite, project manager from the Environment Agency’s national capital programme management service, said: “We are well under way with the embankment thanks to the dry weather we have had these past few weeks. The diversion channel will begin next week with the actual river diversion through the new structure planned for the week commencing May 9.
“The winter floods affected the site quite badly and we had to close down completely for three months.
“The new completion date is the end of August with contractors VBA then completing reinstatement works until the end of September.”
The scheme is designed to protect Croston from flooding by holding water back in a large storage area upstream of Eccleston Bridge.
The storage area will be able to hold the equivalent of 520 Olympic-size swimming pools of flood water.
Any flooding above the capacity of the storage area will flow back into the River Yarrow downstream of the embankment.
The Environment Agency say it will protect up to 438 properties, as well as highways and farmland.
The scheme is due to be completed by the end of August, with reinstatement works until the end of September and then landscaping and river habitat improvements.
It is much awaited by many residents and businesses owners in Croston following several floods in recent years.
Floods on Boxing Day forced many residents to leave the village and businesses to close while repairs were made.
Several feet of water got into buildings, causing extensive damage.
Some people had to stay at Croston Sports Club for several days and a massive fund-raising appeal was launched to help those affected.
The Army and a Chinook helicopter were called in to deal with the immediate aftermath and Prime Minister David Cameron visited in January to see the work going on to repair the damage.
Croston had previously flooded several times, including in 2012.