The Chapel Street venue will now forge ahead with the planned £412,000 expansion to its theatre and dance studio facilities which is hoped to be completed by September next year.
The rest of the project will be funded by Déda cash reserves, charitable trusts and foundations with support from the University of Derby.
Work on the new dance and production studio, conference facility and glass atrium linking both buildings is now due to start in April 2014 when the leisure centre will be de-commissioned to make way for new state of the art sports facilities elsewhere in the city.
Michaela Butter MBE, chair of the board of trustees at Déda, said: “We are delighted that Arts Council England have recognised the value and ambition of our proposals and have taken the strategic decision to support our expansion plans with the grant awarded through a competitive bidding process.
“This support demonstrates the Arts Council’s confidence in the organisation moving forward and we will now be forging ahead with plans for this exciting development.”