The colourful artwork will depict many of the city's familiar and quirky landmarks in a unique way.
Painted in bright colours, the commissioned work is the creation of two nationally acclaimed Bristolian artists –Andy Council and Luke Palmer.
Better known in the street art and graffiti world as Acerone, Luke Palmer's latest work mixes monochrome with vibrant colours.
Dinosaurs and buildings are a common feature of Andy Council's work, so the mural will depict a mixture of these elements when it is finished.
The pair have been working on the mural all week.
"We are delighted to have two local artists working in M Shed," said Julie Finch, head of Bristol's museums, galleries and archives.
"Their styles are very different, which makes this collaboration extra special.
"Window on Bristol is a celebration of the city, its past, the present and what could lie ahead.
"Its bold, striking images will animate the Living Bristol Gallery, draw people in, spark debate and will encourage visitors to explore and discover the fascinating histories and stories behind the objects and artefacts on display."
M-Shed, which is to open two years late in spring 2011, aims to tell the story of Bristol, from prehistoric times to the present day, all under one roof.
Three galleries – Living Bristol, People and Place – will feature stories from residents of the city across hundreds of years.
Window to Bristol will greet visitors in the Living Bristol Gallery.
M Shed is on the site of the former Industrial Museum by Prince Street Bridge.
The museum will be free but one temporary gallery could charge to attract world-renowned exhibits such as the Terracotta Army from China or Tutankhamun from Egypt.
There will be a number of the most popular exhibits from the Industrial Museum on display, and visitors can take steam train and boat rides around the dock from the site.
There will also be areas for school children on educational visits.
