Investing $998,532 from the Collie Futures Industry Development Fund, the State Government is looking to turn the Collie Roundhouse into the town's next big tourist attraction.
The grant will help the National Trust of Western Australia to upgrade the facility.
"Conserving the roundhouse will enable this historic landmark to be open for visitors to appreciate its remarkable architecture and historic connections to the town, and prepare the place to a lease-ready state," National Trust of WA chief executive Julian Donaldson said.
"As the Collie region diversifies its economy, enhancing tourism offerings is a key focus for jobs and income improvement.
"Providing infrastructure for commercial and tourism development is a key platform in the shire and region's economic development plans.
"Also key is retention of cultural identity during this transition. The project will allow the social and historic significance of Collie to be promoted."
Regional Development Minister Alannah MacTiernan said the project would return the site to its former glory.
"The roundhouse played an important role in Collie's development and is now set to serve a new generation," she said.
"This exciting project will help to transform Collie's future by unlocking new opportunities for the town and its residents, while importantly conserving the heritage values of the building."
Collie-Preston MLA Mick Murray said it would also pay tribute to the town's history.
"It is pleasing to see the first grant of the Collie Industry Development Fund awarded for such an exciting project," he said.
"The work that the National Trust will undertake will ensure that the roundhouse is safe for public use, specifically it being structurally sound and free from any contaminants from its past use in the rail industry.
"We want the re-purposed roundhouse to be an icon for Collie and the South-West, and this is a big step forward in realising that vision."
Developed in the 1950s, the roundhouse was built to house 14 steam locomotives. A 100-foot turntable was installed in 1957, before the depot was opened two years later.
Last year, the Shire of Collie council voted to nominate the roundhouse for consideration for the National Heritage List.
