Demolition has begun on the old Pioneer Park sports pavilion which will be remodelled to create the 40-seat theatre.
Central Cultural Centre Committee chairman Bert Kemp said it was great to see everything finally coming together after so much time.
The $600,000 price tag had been raised through years of fundraising as well as grants.
Central Cinema Inc chairwoman Karin Bowen said though the initial plan was to have two cinemas, a 40-seat and a 60-seat one, it was not economic to do so at present.
The redevelopment is expected to take about three months and open in late February.
Mr Kemp said it would be "luxurious" in comparison to the meeting room in the adjoining museum where movies were currently screened - "and they're not comfy chairs, they are just normal meeting room type chairs . . . the new theatre will have proper theatre chairs."
The tiered theatre room will measure about 60sq m.
The total redevelopment will include a projection room and small art gallery as well as internal toilets - a first for the building which also houses the Central Stories Museum and Art Gallery.
The new art gallery will be next to the Russell Henderson gallery, separated by a wall which can be opened to provide more room, if required.
Mrs Bowen hoped there would be three screenings a week at the cinema but that could be increased.
"We would like to screen more children's and young people's films, and if we got something like The Hobbit then we would screen it more [often] because there would be a lot of people wanting to see it."
She said it would not be just a theatre but a multipurpose room which could be used for lectures, presentations, poetry readings and small drama productions.
It would not be run as a commercial enterprise but would remain by the community for the community, she said.
There had been previous commercial cinema operations in the town, based in the community centre but they folded "a long time ago".
Three different groups have been involved in the project - the Central Cultural Centre Committee, the museum board and the Central Cinema Inc.
