Manger Hannah Morton said the money - which was allocated as part of the state government's regional growth fund - would enable the cinema's transition to digital.

"We've been waiting for word from the state government because we knew that (funding) would get us over the line," Ms Morton said.

"We're hopeful that by June we will be screening fully digitally.

"It will improve our programming and improve the way it is presented."

The cinema has been operating since 1999 and is run mostly by volunteers.

It currently displays films using an analogue film projector but has been fundraising and campaigning for money to buy digital screening equipment since April last year.

Ms Morton said the board was thrilled with the government's decision.

"I'm getting together with the board members and I'm sure there will be lots of corks popped ... it's been a long time and a lot of work has gone into it," she said.

Member for Northern Victoria Damian Drum said the cinema played a vital role in the community and the new technology would secure its future.

"Without the upgrade ... the cinema would inevitably close," he said.

He said the technology would attract new viewers.