Mr Foss said the upgrade was expected to take about 18 months and would provide a 21st-century learning environment.
About 420 pupils would be based at the new Caversham site for the beginning of the 2014 school year, he said.
"New classrooms will be constructed first, and used to accommodate students while the rest of the school is redeveloped.
"I want to acknowledge the hard work of school boards and the co-operation of parents throughout this process - everyone is working together to secure the best possible educational outcome for the students," Mr Foss said.
However, principal Ben Sincock said the length of time the ministry had taken to make the decision was "atrocious".
The school was to have been developed and ready to accommodate pupils at the start of term 1 this year, after the merger of Caversham, College Street and Calton Hill schools.
"It's laughable how long it's taken.
"If there were National Standards for the performance of the Ministry of Education and the Government on this issue, they would be identified as 'at risk' and 'achieving well below the expected standard'.
"There's a lot of ill feeling in the community and among school staff towards the Government and the ministry, for the delay and the lack of communication. Hopefully, the ministry has learnt from this situation."
He said that, fortunately, the pupils had not been affected.
"They are getting quality programmes in front of quality teachers. But it costs a lot to run three sites. This could have all been avoided if the parties involved had been better organised from the outset."
Mr Sincock was pleased with the increase in funding to $4.6 million, and believed the school could do a lot with it.
It was hoped building plans would be finalised before the end of this month, he said.
Dunedin South Labour MP Clare Curran was sceptical about the amount set aside for the upgrade. She believed rebuilding the school, fit for purpose for the size of the roll, would cost about $10 million.
Establishment Board of Trustees immediate past chairwoman Isabell Sinclair Irwin said the board had worked hard for the increase, and was delighted with the announcement.
She said the ministry initially allocated $1.8 million.
"The process has taken a great deal of time."
