The project is part of a $7.362 million redevelopment that includes the Oamaru Public Library and North Otago Archive.
The Waitaki District Council has provided the project with seeding finance of $1 million from property surpluses.
The remainder will be raised from external sources, including by applying for grants from Creative New Zealand, the Otago Community Trust and the Lottery environment and heritage fund.
Museum director Rowan Carroll outlined the project to the Waitaki Tourism Association on Wednesday night.
Christchurch-based Modern Architecture Partners is preparing a concept plan, which, it is hoped, will be ready by the end of the year for consideration by the council.
Ms Carroll said the council's 2005 culture and heritage strategy highlighted the need for change at the museum.
"The community describes it as dark, dusty, dingy and dull."
However, the museum's collections were anything but ordinary and included an exceptional Victorian clothing collection and the significant Willetts collection of Maori artefacts from the mouth of the Waitaki River.
A museum advisory group, at a two-day workshop with Wellington-based exhibition design company Story Inc!, looked at stories of the region and married those with the museum's collection strengths.
It came up with three galleries.
The Victorian Oamaru Gallery would feature the clothing collection, presenting a day in the life of the region.
"So, imagine entering a space where mannequins in full colour are arranged in social groups - a street scene on a busy day.
"These aren't typical mannequins that take your attention from the story; their faces are screens that come to life with projections."
At various points would be mini-dramas conveying significant historic events.
The Waitaki Development Board has announced a similar project, the $3 million Inside Victorian Oamaru heritage tourism venture.
The museum would not compete with that project if it went ahead, Ms Carroll said.
The Mana Whenua Gallery would tell the pre-European story of Polynesian migrants, using modern technology combined with the Willetts collection.
The Experience Waitaki Gallery would be "a modern hi-tech environment", capturing the district's geological, natural and contemporary social history.
Its features could include the North Otago penguins, Moeraki boulders, Vanished World fossil trail and local successes such as Whitestone Cheese.
What is proposed
Multimillion-dollar development.
Three galleries: Victorian
Oamaru Gallery: A day in the life of the region.
Mana Whenua Gallery: The pre-European story of Polynesian migrants.
Experience Waitaki Gallery: The district's geological, natural and contemporary social history.
