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The move follows a £6.8m allocation from Fife Council and support from the Carnegie Dunfermline Trust.
Richard Murphy Architects have been awarded the contract to design the building, which will seek to compliment the existing Abbot House, Dunfermline Abbey and a nineteenth century bank.
The Council says the building should be ready to open by 2016.
A full archaeological dig on the car parks behind the library and former bank is also in the pipeline.
Councillor Mike Rumney, chair of the City of Dunfermline Area Committee said: “We will use this modern, purpose-built, integrated centre to tell the story of the City’s unique place in Scottish history.
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"Dunfermline already boasts King Robert the Bruce’s tomb, the birthplace of Charles I and Andrew Carnegie’s home. The new museum will offer an insight into social and industrial history and host an ambitious temporary exhibition programme.
"We’re looking forward to working with our heritage partners to attract more visitors to Dunfermline by providing a gateway to all our visitor attractions.
"As well as the exciting new displays and exhibitions, there will be spaces for lectures, meetings, activities and events. These will all sit alongside new local studies and archive facilities, full library services, visitor information, a café and shop.
"This new museum will showcase the past in a building fit for the future and give young and old a chance to access first class cultural facilities. It also reinforces the council’s commitment to make a real difference to the City centre through the town centre action plan."
Colin McLean, Head of the Heritage Lottery Fund in Scotland, added: "The new museum will be a fantastic boost for Dunfermline and a top visitor attraction for Scotland. New life will be breathed into these two striking buildings so that treasures, which have been stored away for years, can be brought out for people to enjoy in a dynamic and contemporary setting."
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