The Glasgow Film Theatre (GFT) will create a new 60-seat cinema as part of a £1.6m renovation project.
According to the proposals released recently, the development will also improve disabled access, renovate the foyer and move the café area at the Rose Street cinema.
Glasgow City Council has agreed to give a £500,000 grant towards a £1.6m project to expand the theatre.
Councillor Gordon Matheson, leader of Glasgow City Council, said: "Glasgow is a city that has long been in love with the movies. It is a love affair which has helped turn our city into the centre of Scotland’s film and television industry.
"However we have to ensure that we continue to support and give a platform to new talent coming into these industries. This is a vital part of the work of GFT which is one of the UK’s most successful cinemas."
The new developments will create a third screen to cope with demand in the hugely popular cinema, relocate the box office to its original location at the front of the foyer, reconfigure the café by renovating the upstairs bar and creating a bar area in the rear of the foyer and enhance disabled access.
GFT was established on the site of The Cosmo in 1974, with 12 Rose Street an operating cinema since The Cosmo opened in 1939, and the independent cinema welcomed admissions of over 200,000 in the financial year 2011/12.
According to the GFT the lack of space has affected the its ambitions for Glasgow Film Festival – the third largest festival of its kind in the UK, which runs from February 14 to 24 next year. The addition of a third cinema screen, which is expected to open at the end of 2013, will help the GFT meet these demands and also increase its education and outreach work.
Bailie Liz Cameron, Chair of Glasgow Film, said: "We are delighted with this announcement and would like to express our thanks to Glasgow City Council.
"Glasgow Film Festival is the fastest-growing film festival in the UK with admissions of over 35,000 in 2012 and, with GFT as its hub, our new cinema screen will allow us to increase our Festival audiences as we look towards our tenth anniversary in 2014."
In terms of funding, £100,000 towards the creation of the new cinema space has also been awarded from Creative Scotland Additional funding has been awarded by The Robertson Trust, The Gannochy Trust, the Garfield Weston Foundation and the Landfill Community Trust, alongside the GFT’s reserves.
From 2014/15, the theatre is planning to allocate 300 out of the 1500 new slots at the theatre to non-cinema activity, including youth group meetings, extended talks and debates, and private hire.