Church to mark milestone in 1,000 years of history.
Grade I listed St Mary's Church next to the Tyne Bridge currently houses Gateshead visitor centre.
The Heritage Lottery Fund cash follows an earlier award of pounds 500,000 to buy and repair the church.
HLF regional manager Dr Keith Bartlett said: "St Mary's is a special part of the skyline in Gateshead.
"As a heritage centre, St Mary's will provide the perfect venue to tell the tale of the massive renaissance of Gateshead."
The church dates back to the 12th Century, and is Gateshead's oldest building.
The centre will reflect the life of the newly regenerated quayside area with depictions of key moments in the history of the town - such as the murder of the first of Durham's Prince Bishops, William Walcher on May 14, 1080, the Civil War and the great fire of 1854.
Gateshead council's culture spokesperson Linda Green said: "The creation of a heritage centre on Gateshead Quays will present fantastic opportunities to celebrate our rich history as well as demonstrating our commitment to developing a heritage offer for Gateshead."
The plans include a centre of excellence for family history, an exhibition and interpretation area, and a learning space.
Work on the centre begins in September and is expected to take nine months and cost pounds 1.2m.
LANDMARK: St Mary's, Gateshead, dates from the 12th Century, has survived fire, war and turmoil, and now it has a story to tell. Photo Leanne Holcroft