The project would see a new roof, the opening out of the grand staircase from the first floor auditorium to the foyer, and bring now closed spaces back into use.
It would create additional dance studios and workshops, refurbish toilets and improve disabled access to the building and the theatre.
A bid for the cash from the Heritage Lottery Fund has already passed its first hurdle and Burnley Council’s leisure chief Cllr Lian Pate is now hopeful the full sum needed for the project will be approved.
Heritage Fund bosses were so impressed with the initial stage of the application they asked for the second phase of the bid, for £50,000 to pay for experts to work up a detailed project specification, to be submitted urgently.
That document has now been submitted to the Heritage Lottery Fund.
Burnley Mechanics opened its doors in 1855 but closed in 1959 before being bought by Burnley Council and reopened as an entertainment venue.
In recent years the Grade II listed building has proved increasingly successful with a bistro and bar downstairs complementing the first floor theatre.
Cllr Pate said: “We are very hopeful this scheme will get the final approval after the warm reception of the original material by the fund.
“This is a major project to bring the Mechanics, a key part of Burnley’s Victorian and textile heritage, into the 21st century and make it viable for another 150 years.
“It will bring rooms and spaces currently closed and a bit tired back into use.
“The mains staircase will be opened out and refurbished, the roof will be fully repaired, disabled access and toilets will be improved, and new workshops and dance studios created.
“We also hope to see improvements to seating and disabled access to the theatre.
“This is a joint project between the council and Burnley Leisure Trust to improve and secure a really successful venue, vital to the town for the future.”
Cllr Gordon Birtwistle, leader of the council’s Liberal Democrat opposition group, said: “I am fully behind this scheme.
“The Mechanics is a vital and exciting venue for the town and I hope the lottery bid succeeds.”
The initial ‘Transforming the Heritage of Burnley Mechanics’ scheme draft project won £10,000 from the Heritage Lottery Fund in February and was submitted in August.
Fund bosses then asked for the second stage application to be prepared in four weeks as they were so impressed with the initial outline and local responses.
In a report to council colleagues, Cllr Pate said: “That application has now been submitted to the Heritage Lottery Fund’s Your Heritage Programme.
“If the application is successful the Heritage Lottery Fund will award a grant to develop detailed proposals for the scheme that will include converting the ground floor into new dance studios and workshops, visitor facilities, develop educational use of the building and celebrate the heritage of this important building.
“The overall scheme will be worth approximately £2.8 million and importantly the project will also help secure the future financial viability of the Mechanics.”
She revealed the council has already set aside £300,000 for roof repairs that will now be used as the ‘match funding’ necessary for the heritage lottery bid to succeed.
Cllr Pate said: “The lottery fund bosses were really impressed with our original submission and we are now very optimistic about the scheme. It is just the sort of thing the Heritage Lottery Fund is all about.”
Burnley Council leader Mark Townsend said: “This a really important part of our Victorian heritage and a really important part of the town’s life.
“This will really bring it into the modern age.
“I am really looking forward to seeing the main sweeping staircase, an unmissable feature, brought back to its original glory.”