The abandoned Pinjarra Exchange Hotel is set to become a "regional icon" with a major plan to redevelop the site now underway.
In March, Shire of Murray councillors approved a $4.1 million redevelopment project to turn the landmark site into a hospitality venue with flexible spaces for events.
A relaxed bar and restaurant that would seat 500 people, market garden, central commercial kitchen, and retail space are a part of the plans.
On Friday, the federal government committed $2.3 million to the development through a Building Better Regions grant with the shire set to fund the rest of the project.
Shire of Murray chief executive Dean Unsworth said works would be complete by the end of 2023.
"The Murray community have patiently awaited the right opportunity to redevelop the much-loved Exchange Hotel site," he said.
"The funding is going to help redevelop the historically significant site into an investment proposition that is operator ready.
"Additionally, it will support broadening Pinjarra's economic capacity, stimulate further private investment, create jobs...and deliver a broader scale investment encouraging positive flow on benefits to the community and local economy."
The heritage listed hotel dates back to 1866 but closed in 2008.
According to shire officers, the redevelopment of the hotel will bring in $57 million over five years, see almost 38,000 new visitors to Pinjarra annually and create 48 full-time jobs.
Canning MP Andrew Hastie said the Exchange Hotel development complements recent projects in the region.
"It builds on the tourism attraction of the Dwellingup Trails, and the safe opening up of the historic town centre with the planned and funded Pinjarra Deviation."
Through the Building Better Regions grant, the Shire of Waroona also received $900,000 to construct stage one of its community precinct.
Regional Development Australia (RDA) Peel chair John Erren said the RDA worked closely with both shires during the application phase.
"RDA is extremely pleased these projects have been successful in obtaining funds from an extremely competitive process," he said.
"They will both drive further development in their respective communities and provide economic and social opportunities for local business and residents."