The project aims to boost milk yields from local breeds of goats and sheep on the island so that demand can be fulfilled.
Researchers are to help farmers design selective breeding programmes by investigating genetic differences that are linked to increased milk production.
Experts will also assess how animal feeds can be improved to optimize milk yield and how soils in Cyprus can be enriched by adding beneficial species of bacteria and fungi.
Halloumi makes an important contribution to the Cypriot economy, accounting for more than 15 per cent of the total domestic exports. The UK is the number one export market for the cheese.
At present, much of the halloumi that reaches supermarket shelves contains a significant proportion of cow's milk, which is cheaper and more widely available.
Cyprus has applied for halloumi to be recognized with Protected Designation of Origin status - a European Union award designed to protect traditional, regional foods against imitation. It would stipulate that halloumi must be produced predominantly from Cypriot Sheep and Goat milk.
If the PDO is granted, milk production from Cypriot sheep and goat breeds will need to increase substantially to ensure that current demand for halloumi cheese is satisfied.
The AGRICYGEN partnership - funded by the European Union - connects research institutions in Cyprus with world-leading experts in agricultural genetics from the UK, France and Germany. The University of Edinburgh's Roslin Institute is among those taking part.
A new research center will be set up in Cyprus to increase the country's capacity for analyzing animal and plant genomes. The center will also train early career scientists.
Dr Ricardo Pong-Wong, a Quantitative Genetic Tools Specialist at the University of Edinburgh's Roslin Institute, said: "The project combines our specialism in animal genetics and genomics with expertise in plant and microbial genetics. It will allow implementation of an effective scheme to secure the future of halloumi that takes into account the unique conditions associated with farming Cypriot goats and sheep."