Using a revised estimate for August, the department said there were 872,000 private home construction starts in September compared with 758,000 in the previous month.
Housing starts gained dramatically over September 2011, rising 34.8 percent from the 647,000 housing starts posted a year earlier.
The numbers reflect an index released Tuesday that said confidence among home builders had risen for the sixth consecutive month in October.
In September, project permits issued -- representing construction starts one and two months down the road -- rose by 11.6 percent month-to-month, a sign that construction starts will continue to rise.
At a seasonally adjusted annual rate of 894,000, permits issued came in 45.1 percent above September 2011.
The department said 683,000 privately owned housing construction projects were completed in September on a seasonally adjusted annual basis.
There were 0.4 percent more completions in the month than in August, where a revised estimate put completions at an annual rate of 680,000.
The number of completed projects in the month came in 13.8 percent higher than September 2011 when an estimated 600,000 projects were completed, the department said.
GM recalls 221,000 Cadillacs and Impalas