Funding a £1bn M4 relief road across the Gwent Levels could stop electrification of railway lines in the south Wales valleys, campaigners claim.
UK and Welsh ministers are arguing over who should pay for the rail upgrade.
But the Campaign Against the Levels Motorway (Calm) warned Welsh ministers might have to choose between the two schemes.
Calm says upgrading the A48 and a road through the former steelworks at Newport would be much cheaper.
The group's alternative plan for reducing congestion on the M4 around the city was proposed in a report for the Institute for Welsh Affairs (IWA) last December.
The document said the estimated cost of that scheme was £380m.
Welsh ministers have said tackling the bottlenecks is essential for the Welsh economy.
The main element of their plan is a section of three-lane motorway between M4 junction 23 at Magor and junction 29 at Castleton.
They are considering responses to a consultation and are due to make an announcement in the summer.
On Thursday, Calm's spokesman Gareth Clubb said: "If UK government ministers are to be believed, the Welsh government has agreed to pay for electrification of the valleys line.
"But at the same time, Edwina Hart [the Welsh transport minister] is pushing ahead with plans to build a hugely expensive, environmentally destructive motorway through the Gwent Levels.
"The Welsh government hasn't got a bottomless pot of money for transport projects, at some point it's going to have to make a choice.
"So will it choose a motorway of questionable benefit for the few, or better public transport for hundreds of thousands of people in the valleys?"
First Minister Carwyn Jones has accused the UK government of going against a pledge to pay for electrification of the valleys network.
The UK government says an agreement was made two years ago for Welsh ministers to cover the cost.
In a statement the Welsh government said Calm was "wrong".
"This is not a case of 'either or' as any M4 enhancement would need to be complementary with public transport improvements.
"Discussions are ongoing with the UK regarding the funding of valleys line electrification.
"Meanwhile, all responses to the M4 consultation, including any alternatives proposed, are currently being considered and an announcement is due in the summer."