Telford Theatre will close for a two-year refurbishment, costing £15.5m, to be funded by the government's levelling-up scheme.
The building is due to shut in spring 2024 and reopen in October 2026. A temporary site will host shows in the interim.
Originally opened in 1968, the current theatre seats 490 people and is in need of significant maintenance, according to the local council.
The revamped auditorium will have a 750 capacity, while a new secondary studio will have 98 seats.
Also included in the project is a new creative community art room and the introduction of air source heat pumps to heat the building.
The scheme is part of a newly planned Theatre Quarter for the Oakengates area, which will involve demolishing several shops. In October, shop owners told the BBC they were not offered enough compensation and had uncertain futures.
Speaking about plans, Councillor Shaun Davies, leader of Telford and Wrekin Council, said, "This is a defining moment for our community.
“The remodelling of Telford Theatre underscores our commitment to nurturing the arts, cultivating talent and revitalising our vibrant town.”