Swindon Borough Council has said it will put up the £1.2m needed to restore the town's Wyvern theatre.
The Wyvern Theatre will remain closed until 2007
The theatre closed in August following the discovery of asbestos.
Several shows, including the Christmas panto, have been cancelled at the theatre, which will now cost £1.2m to clean up and refurbish.
Andy Hill, theatre manager, said: "The ceiling had the asbestos in, and the seats and carpet have to be replaced. It looks like a concrete shell."
The council voted on Wednesday to provide the necessary refurbishment funds.
The theatre is likely to remain closed until autumn 2007, however.