The scheme to upgrade the Grade-B listed building to become a multiple-use museum and arts venue will receive £300,000 from the UK Government.
The project, being taken forward by The Whithorn Trust through a social enterprise, will have the bonus of equiping young people with traditional stonemasonry and joinery skills during the restoration.
An important aspect of the development will be the design's state-of-the-art energy efficiency.
Dumfries and Galloway MP Alister Jack, who recently visited the building, explained the Whithorn project was included as a first round recipient of the new UK Government Community Ownership Fund.
He said: "I believe this is a fantastic project which will secure the future of this important building and, together with other work going on in the community, will be a tremendous asset to Whithorn for generations to come."
The UK Government announced more than £172m direct investment for Scottish projects on Budget Day as part of their new community funds programme.
New Galloway Town Hall is to receive a grant worth £175,000 to help upgrade the building to create an accessible, functional, low emission space for community use.