The Bristol Old Vic theatre has been awarded £3m to kick-start a £7m refurbishment project planned for 2008.
The city council is contributing £1m towards the revamp and Arts Council England has pledged £2m.
The work will include upgrading the Main House and Studio and improving licensing, access and services to the 240-year-old Grade 1 listed building.
The rest of the money will be sought from trusts, foundations, corporate sponsors and individual benefactors.
The theatre's artistic director Simon Reade said: "As Bristol develops at the start of the 21st century, core investment in recreational, artistic, social and educational values is essential to the current and future well-being of its citizens.
"Bristol Old Vic, as the major national producing theatre in the region, is the city's prime example of those intrinsic values."
Councillor Simon Cook added: "It is this city's duty to help safeguard the future of one of Bristol's most important buildings and to ensure that the Bristol Old Vic will have a home for the future."