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The city council has decided to dispose of a 270 square metre site for the arthouse project.
Construction is expected to begin on the four-storey structure in May.
The eventual facility will offer a 340-seater cinema close to the docks area on Lower Merchant's Road.
The scheme is part of the city council's bid to create a thriving cultural quarter, and has been backed by Solas, which includes the Galway Film Society, Galway Film Fleadh, Galway Film Centre and Galway Arts Centre.
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Galway City Council is to provide €1.96m towards the cost of the project, which will cover the purchase of the site.
The entire scheme is expected to be worth around €6.36m.
Completion is expected by next year, and will result in three screening room.
The basement level will have 176 seats, a 77-seater will be available on the second floor, as well as a 105-seater in the third floor and a 28 seat balcony on the top level.
A cafe and bar will also be included in the development, in addition to a book and DVD shop.
The project was earmarked in the current city development plan which recognised a "deficit of culture and arts infrastructure in the city".
The council said that "in order to enhance the culture of the city the infrastructure needs must be expanded".
Galway City Council acquired property in the area to bolster it 'cultural quarter' plans.
(PR/JM)
