Lampeter University has joined forces with Trinity College
Education Minister Jane Hutt has approved £14.3m funding for Wales' newest university.
The decision was taken in April to merge Trinity College in Carmarthen and Lampeter University to form University of Wales Trinity St David.
The money will be used to strengthen existing academic departments and improve buildings and facilities.
The first students will enrol in the the new campus for south west Wales in September 2010.
The funding was awarded by the Higher Education Funding Council for Wales (HEFCW).
Medwin Hughes, vice-chancellor of University Wales Lampeter and Trinity University College, welcomed Ms Hutt's approval of the award.
He said: "This is history in the making, which will not only create a powerhouse for education in south west Wales but will also bring a much-needed boost to the regional economy."
UW Trinity Saint David began work as one institution by this July, with Dr Hughes as its vice-chancellor designate.
Lampeter is one of the oldest higher education institutions in the UK. Last year it threatened redundancies because of a significant rise in pay costs.
The university's vice-chancellor said at the time the merger would protect jobs and attract investment.
The decision was made by governors at Trinity College and Lampeter after a report explored the benefits of closer ties.
The new institution will seek a charter from the Privy Council to formally create the new university by July 2010.