A bid was submitted for funding to improve Jenner Gardens by Cheltenham Borough Council and the Friends of Jenner Gardens.
The cemetery is named after Edward Jenner, the pioneer of vaccination who lived nearby in the late 1700s.
Once fully restored, using money from the BBC's Breathing Places, it will commemorate Jenner's achievements.
"We're delighted that we can now go ahead to restore this small but special place in the middle of town," said Claire Stenson, landscape architect with the borough council.
Green spaces
The 12-month project will involve some structural work to the boundary walls and new railings that will be in keeping with the setting.
New walking surfaces will be laid and the gravestones will be lifted and re-laid without disturbing any remains.
"We hope to put up some interpretative panels which tell something of the story behind Jenner Gardens and the man they commemorate," said Ms Stenson.
Jenner's research focused on a vaccination to combat smallpox.
One hundred and eighty four years after his original experiments, the World Health Organisation was able to announce the eradication of this disease.
Secretary of the Friends, Mike Rigby, said: "This grant will help us transform a neglected graveyard into a tranquil, south-facing garden which local people and visitors to the town can enjoy."
The Breathing Places Campaign (2005-09) aims to inspire a million people, currently not active in the environment sector, to get involved and transform or create tens of thousands of wildlife friendly green spaces across the UK.
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