Buiding costs have been estimated at £5.5m
A £500,000 grant has been awarded to Cheltenham Art Gallery and Museum's development scheme.
The gallery's Building for a New Future programme will benefit from the cash, which has been donated by 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 will provide new exhibition galleries on four floors, new open access storage and study areas."
The designs also include spaces for education and outreach services, improved visitor facilities and a cafe.
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."
Cheltenham Borough Council was due to debate planning permission for the project on Thursday evening.