The museum and art gallery is more than 100 years old
Cheltenham Art Gallery and Museum's development scheme has been awarded £500,000 towards its fundraising campaign.
The gallery's Building for a New Future programme will benefit from the cash from The Monument Trust.
The grant brings the total raised for the scheme to £3.8m.
The art gallery and museum can currently only display a third of its collections. The cash grant will go towards its extension plans.
A spokesman said: "The art gallery and museum, now over a century old, attracts over 60,000 visits per year to exhibitions and displays of collections, which include a nationally-designated arts and crafts movement collection.
"The design for the new development, by architects Berman Guedes Stretton, will provide new exhibition galleries on four floors, new open access storage and study areas as well as dedicated spaces for education."
Jane Lillystone, museum and arts manager added: "This is a significant grant from The Monument Trust and is excellent news for us as we move forward to the launch of the second phase of our fundraising campaign in September.
"With building costs fees estimated at £5.5m this means we have now raised 70%of the funds needed to start construction, the remainder of which we hope to secure by spring or summer 2010."