The scheme is expected to go out to tender soon, with work due to commence later this year.
Council chiefs have said that they want to retain the landmark building in the town centre, and aim to refurbish the town hall to a high standard.
They also wish to preserve and enhance the Market Street building to ensure that it can continue to be the headquarters for important local services for many years to come.
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The refurbishment will include improvments to the heating, ventilation and lighting within the building, which is currently home to Westhoughton Town Council.
It is anticipated that it will continue to be occupied throughout its refurbishment.
“This represents a very significant investment in Westhoughton town hall, which the council recognises is a vital hub for services and the local community,” said Cllr Linda Thomas, leader of Bolton Council.
“It’s wonderful for the people of Westhoughton and important to preserve the heritage of this iconic building in the heart of the town centre.
“I look forward to seeing the building when it is completed.”