The Tate Gallery plans to invest £1m in cataloguing the works of artist JMW Turner, and £10m on new art, following an insurance payout of £17m.
The Tate Gallery now owns the rights to both Turner paintings
The money was paid to the gallery after two of its works by Turner were stolen from an exhibition in Germany in 1994.
Both paintings were recovered, but the gallery still received a sum of money for their loss after reaching an agreement with the insurers.
They have consulted with the Charity Commission on how it should be spent.
The two paintings in question - Shade and Darkness - the Evening of the Deluge, and Light and Colour - the Morning after the deluge) were part of Turner's bequest to the nation.
As a result of this, the gallery was concerned they would be unable to spend the money on other projects and sought legal advice.
However, following consultations which were taken to the Attorney General, the gallery has been told it is free to spend the money on its entire collection, rather than just the Turner Bequest.
"It was a great loss when the Turners were stolen in 1994 and it is a great relief for us to now be in a position to have the paintings returned and a sum of money which will enhance our understanding of Turner," said Sir Nicholas Serota, Tate director.
"This funding will allow us to fulfil the ambition of every Turner scholar which is to see the works on paper of Britain's greatest landscape painter properly catalogued and contextualised."
The original cataloguing of Turner's work began almost 100 years ago, but researchers now estimate it could be completed within five years.
Meanwhile, reports that members of Turner's family had criticised the Tate for spending the money on works other than those by Turner have been denied by the Gallery.
A spokeswoman for the Tate told the BBC News website that the family had yet to voice any concerns directly to the gallery.
The remaining £6m from the insurance money will be spent on research, conservation and improving access to the gallery's collection store in Southwark, south London.