Four hundred and fifty permanent seats will be added to the Brandywell in time for Derry City's Uefa Cup return game Gretna on 24 August.
The Brandywell will host Gretna on 24 August
The decision was made on Tuesday following a series of meetings between Derry City Council and the Football Association of Ireland.
Over £27,000 will be spent on seating, preparatory works and a drug testing facility in advance of the game.
The Brandywell will now be able to accommodate 2,900 fans on 24 August.
Tickets for the game were sold out within an hour on Monday.
Around 300 Gretna fans are expected to attend the game in Derry.
The first leg between the clubs takes place at Fir Park in Motherwell on Thursday evening.