Darlington's Civic Theatre has received £5m from the Heritage Lottery Fund, which will be used as part of an £8m project to transform and restore the grade-II listed building.
The building will be transformed back to its "former Edwardian glory", including improved seating and the restoration of the theatre's front exterior.
There will also be major improvements to the backstage areas, which will bring the theatre up to modern standards and allow it to accommodate larger touring companies and bigger shows.
Lynda Winstanley, Darlington Civic Theatre director, said: "This is incredible news and will help us to ensure this well-loved venue can meet the expectations of modern audiences and touring theatre companies.
"The theatre stands on the threshold of a new era; coupled with the development of Theatre Hullaballoo next door, this is a unique opportunity for supporters old and new, to join with us to take the theatre forward into the next chapter of its incredible history."
The theatre received £1.5m of funding from Arts Council England earlier this year in a joint bid with Theatre Hullabaloo to build a children's theatre next door.
Work is expected to start on the refurbishment in summer 2016.