Yarra Primary School is set to receive $7.2 million to modernise two of its buildings.
The money was announced in the State Budget, which was released on Tuesday.
Principal Saraid Doherty said the school community was thrilled to receive news of the funding, which it had been seeking for several years.
Doherty said the school had been engaged with Planning Minister and local member Richard Wynne's office for several years over the need to update the buildings - one of which was constructed in the 1970s, and the other dating back to 1886.
"The 1886 building brings a lot of challenges, especially in terms of heating and cooling, because it's close to 150 years old," she said.
It also caused occupational health and safety problems - for instance in painting its very high ceilings.
The principal said while Yarra Primary had received some Building the Education Revolution funding to modernise classrooms around a decade ago, some of its facilities were not fit for purpose.
The modernisation project will deliver a new art room and science space, increased storage, an improved administration area and an undercover space for students to gather in.
It will also enable natural light to be brought into the buildings - something which is currently lacking - and other sustainability features.
Doherty said the school community looked forward to creating "a nice, safe, healthy environment" for both students and staff.
"Improving the quality of the environment impacts the quality of learning," she said.
The project will be delivered in conjunction with the Victorian School Building Authority and the City of Yarra, with the first tranche of funding available next financial year,
"It's been a long time coming but we will gratefully receive it," Doherty said.
"It's fantastic, it's brilliant, I'm really excited."