The grant brought the Blueskin Bay Library Redevelopment Trust tally to $638,000 - mostly from the Dunedin City Council - for the $860,000 project, trust chairman Stuart Strachan said.
The project, involving demolishing the existing 19-year-old library, has been controversial.
Mr Strachan said community opposition to the project was not a major factor, although he acknowledged not everyone was happy.
The planned development had a "green edge", making the most of natural lighting and heating.
It would save people travelling to Dunedin as frequently, as it offered improved services.
"We are now on the home straight after more than five years of community planning and discussion.
"The community has made the best of the current facility but has always had a vision for something more modern to address the shortage of space."
Tenders would be called in March or April, with construction to start later next year. The result of an application to the New Zealand Lottery Grants Board was awaited.
Waitati resident and library opponent Rosemary Penwarden said the library was still opposed by some in the community.
"But there does not seem to be a way to discuss it," she said.
Otago Community Trust chief executive Keith Ellwood said the donation was part of $730,650 granted to 33 organisations in the latest round.
Grants included: Dunedin Masters Games Trust, $10,000; Dunedin Santa Parade Trust, $15,000; International Festival Environment Science Technology, $50,000; New Zealand Pony Club Association, $15,000; Residents Association Omarama, $95,000; Rail Heritage Trust of New Zealand, $15,000; East Otago District Lions Club Charitable Trust, $15,000; Kati Huirapa Runanga Ki Puketeraki, $35,000.
