Work begins today on the project to re-develop the Theatre Royal in Glasgow, creating a new entrance, spacious foyer and roof garden.
The project will be complete by the time the city hosts the Commonwealth Games in 2014.
Scottish Opera, which has owned the theatre since 1974, has been leading the campaign to find the necessary funding for the work.
The Heritage Lottery Fund has announced it is awarding the project a grant of £850,000.
Colin McLean, head of the Heritage Lottery Fund in Scotland, said: "The Theatre Royal has delighted, educated and entertained generations of theatre-goers, its fascinating history tightly interwoven with the social history and cultural traditions of Glasgow.
"We are delighted to add our support to a project that will not only put this national treasure on a world-class stage but will inspire and involve people of all ages with memorable and rewarding experiences to enrich their lives."
The theatre, which was built in 1867, will be transformed with a new entrance on the corner of Cowcaddens Road and Hope Street.
This will provide spacious foyers and accommodate new bars, box office, cloakrooms, toilet facilities, hospitality suites and an education suite, while lifts will be installed for the first time.
The redevelopment has been designed by Glasgow-based architects Page\Park.
Alex Reedijk, general director of Scottish Opera, said: "Our vision is to open up the theatre to become a social hub, somewhere people can gather with friends for great coffee during the day, enjoy outstanding performances, learn about the performing arts, and discover the wonderful heritage of this beautiful theatre."
So far 85% of the funds needed have been raised, including £3.96m of capital funding from the Scottish Government, alongside funding from Creative Scotland, Glasgow City Council, The Heritage Lottery Fund and an array of Scottish and UK trusts and foundations, as well as support from individual donors.
A public fundraising campaign to raise the remaining cash begins later this year.
Culture Secretary Fiona Hyslop said: "This is a major step forward in the redevelopment of the Theatre Royal in time for the Commonwealth Games in 2014.
"This project will create a world-class venue in which to showcase Scotland's globally renowned culture and creativity as well as a lasting legacy for the city and the whole nation."
The construction will take around 18 months, but the theatre will close only for three months in early 2014.
The theatre is owned by Scottish Opera and has been managed by the Ambassador Theatre Group since 2006.