Children aged between 2 and 4 will be given priority for admission to the new centre, in line with Ministry of Education objectives, although the preschool will have the capacity to take children under 2.
Both the new and existing preschools are licensed for 30 children, but shared placements will accommodate another 20 children.
The as yet unnamed facility will be built on Ministry of Education-owned land, off Cotter Ave, next to the Arrowtown School.
Head teacher Jane Foster said the design was being finalised and building consent would be applied for this month. Construction was planned to begin in the spring, with an opening expected in mid-2010.
Up to six extra teachers would be required. Ms Foster said she had already received two CVs from teachers in the Southern Lakes and one from a New Zealander returning from Saudi Arabia.
Ms Foster said staff and parents were excited the funding had been approved.
"It's been a long-time process and we've been turned down before because the ministry only gives so much a year and they found other areas with greater need.
"We were encouraged to try again in April for the next round of the discretionary grant, but we had to do a lot of lobbying. [Clutha-Southland MP ] Bill English and [Queenstown Lakes Mayor] Clive Geddes have really gone in to bat for us.
"The Arrowtown Village Association's Jim Ryan and Paul Anderson helped us with our meeting with Bill English and in supporting us to keep going. Edward Guy did data projections for our applications and Juliet Pope did a great job at putting our application together and designing the building."
The Arrowtown Community Preschool, on the corner of Durham and Caernarvon Sts, has 60 children enrolled, aged between 3 and 5, from Arrowtown, Lake Hayes, Gibbston and Crown Terrace. The sessional preschool has 125 children on its waiting list.
Both preschools would be governed by the same committee and share the same policies, procedures and philosophies, Ms Foster said.
The preschool had to contribute $40,000 in funds and loans towards the second centre's building costs.
Fundraising for about $50,000, to pay for resources and landscaping, would begin soon. The committee would also apply for a $30,000 ministry establishment grant towards that sum.
Ms Foster said the governance committee would next week contact parents who lodged registrations of interest in enrolling their children in the preschool during an earlier survey.
• Parents are invited to register their interest on the preschool's website, www.arrowtownpreschool.co.nz, or by calling the preschool on 442-1416.
