The school has secured $800,000 in funding for the project and is waiting on responses from two more applications.
School principal Wendy Brooks said the building was a "response to community need as well as school need".
It will hold up to 530 people, and include a hall with a stage and a kitchen.
"We thought, let’s try and create it a bit like a house with different places the kids can go," Mrs Brooks said.
It would also have much-needed storage space, she said.
The school had no hall and had to "squash" pupils into its junction suite for assemblies, she said.
The Central Lakes Trust announced this week it would provide $300,000 towards the project.
The Ministry of Education will provide $200,000 for the facility’s toilet block.
The school decided it did not want the ministry to fund other parts of the building, Mrs Brooks said.
"We talked at length about it. If the ministry owned this building in a roll-growth area like Central Otago, they’d make you put two classrooms in there.
"The ministry agreed. The Central Lakes Trust questioned them about it and they said: ‘Wendy’s absolutely right — it’s classroom space before multi-purpose space’."
The school’s roll is 260 but it is expected to grow to 275 by the end of this year and 300 by the end of next year.
The space will also accommodate Cromwell’s school holiday programme which is held at the school.
"The reality is that this year a teacher is going to have to pack up her class and have the holiday programme there in the holidays, and then she’ll put it all back again," Mrs Brooks said.
Other community groups such as karate clubs, indoor bowls and the Girl Guides would likely use the space.
"We consulted the community and found there was a need for a multi-purpose facility. Having it on the school site meant we had infrastructure in place already."
It was a "huge relief" to be so close to the funding mark, she said.
"It’s a community building. That’s why we’ve had this bigger picture. We’ve worked tenaciously for years to get it right."
Construction is planned to begin early next year.
