Minister for Regional Development Jaala Pulford announced the $4 million in funding at The Cube Wodonga.
Wodonga Mayor Cr Anna Speedie said the state's investment will build on the momentum of the transformation of the city centre.
This precinct, which is the anchor of the southern end of the central business district, has more than 300,000 visitors each year, Cr Speedie said.
This important redevelopment will not only meet the needs of our growing community but also provide the opportunity to promote an accessible and fit-for-purpose facility that provides a program of culture, arts and history to our residents and our visitors.
We know that arts and culture contribute to our economy as well as creating opportunities for our community to gather, interact and connect.
Wodonga is increasingly positioned as a regional hub, providing facilities and services for local residents as well as surrounding regional towns.
This redevelopment will see the improvement of the quality of services and community infrastructure strengthen the city's position as a regional hub.
The biggest user group is family households, particularly those with children and we need to ensure that there is sufficient public space, services and amenities available to the growing Wodonga population as well as the regional catchment area.
I've seen our city transform and grow and this redevelopment builds on that momentum to further increase visitation, employment and expenditure in our city.â€
The formal design process of the $10.2 million project is about to begin with the council set to meet with user groups in the coming weeks as part of the process.
Construction is due to begin in mid-next year.
The library will operate from an alternate site during the build while the gallery will explore outreach programs and alternative spaces.