The Heritage Lottery Fund has backed the St Albans Museum and Gallery project with a massive £2.5 million grant.
The money, combined with a previous £300,000 award, will provide around a third of the £7.75 million cost of the scheme.
Councillor Annie Brewster, Portfolio Holder for Sport, Leisure and Heritage for St Albans City and District Council, said: “We are both delighted and honoured the Heritage Lottery Fund is giving this flagship City project its prestigious backing.
“We want to create a fitting cultural beacon right in the heart of our City for all to access freely. In 1831 The Town Hall and Courthouse was built for public use.
“We are now well on our way to creating a new landmark museum and art gallery with three floors of galleries and exhibition space for residents and visitors to enjoy.”
Robyn Llewellyn, Head of HLF East of England, said: “This ambitious redevelopment project will create a ‘one-stop shop’ - celebrating local heritage and culture - right in the centre of St Albans.
“This will provide a much-needed boost to both the local economy and tourism and provide a wonderful opportunity for people to explore the wider history of this beautiful city.
“As we approach next week’s 21st anniversary of the National Lottery, it’s also fitting that we thank National Lottery players for helping bring this vision, with heritage at its heart, one step closer to realisation.”
It is the second major decision in support of the Museum and Gallery project that has been made this week.
On Monday, the scheme was recommended for planning permission, change of use and Listed Building consent by the Council’s Planning Referrals Committee.
That recommendation has been sent to the Secretary of State for Communities and Local Government, Greg Clark, for consideration. He is due to announce his decision by mid-January.
If his approval is given, construction work could start as early as Spring of next year with the Museum and Gallery scheduled to open in autumn 2017.
The scheme to convert the Town Hall, a Grade II* Listed Building, into a new museum and gallery is intended to rejuvenate the cultural life of the District.
It has been in development since 2012 in a partnership between the Council, St Albans Museums and Galleries Trust and the University of Hertfordshire
The overall cost will be £7.75 million with the Council committed to providing funding of £3.3 million.
St Albans Museums and Galleries Trust, a registered charity, is leading efforts to raise £1.7 million with the HLF now providing the rest of the required finance.
For information about sponsorship and donor recognition, please contact Mike Gray, chairman of the St Albans Museums and Galleries Trust, registered charity number 1051868. He can be contacted through the Trust’s website