The project, which focuses on accessibility and collection care was granted $6.5m from the government’s Regional Culture and Heritage Fund.
The gallery, located in the former Bank of New South Wales building built in 1883, lacks a lift and a fully accessible bathroom.
Forrester Gallery director Chloe Searle said she was "really confident" they would now have the funds needed for construction of the building.
There was some legislation to work through, but construction was likely to start this time next year and was on track to open in March 2026.
She was looking forward to the lift which was included in the project as the stairs limited accessibility to the first-floor exhibitions.
Waitaki District Mayor Gary Kircher said he was excited about the new space and the improved accessibility.
The wing would increase space to display art and provide an opportunity to build art into the building.
The existing Category One heritage building was already a piece of art but the new building could take it a step further.
Friends of the Forrester Gallery chairwoman Heather Machin said the funding was great news and was "a long time coming".
She said she felt terrified watching people with accessibility issues going up and down the stairs as there had been accidents previously.
The second and final stage of the project involves a three-storey extension to the back of the building.
The extension was first publicly discussed in the 1990’s, but was not approved by the Waitaki District Council until 2019 under the condition external funding was sought.
Along with the latest in funding, it also received $400,000 from Lottery Environment and Heritage Fund and $60,000 from the John Westwood Christie Trust.
The money was accompanied by fundraising efforts from the Friends of Forrester Gallery, which would continue its efforts to help furnish the building.
Ms Searle said the extension would not try to replicate the Victorian architecture of the building, but would have a limestone veneer to stay in line with the style of the area.
The gallery celebrated its 40th anniversary this year.
