The “significant” funding comes from the Arts Council’s Cultural Development Fund, which aims to improve access to arts and culture and support economic growth across the country.
The cash will be used to create new studios in derelict historic spaces and museum galleries, and new indoor and outdoor areas for events and “cultural activity”.
Leader of Barnsley Council, Councillor Sir Steve Houghton CBE, said that the “significant investment” will have a “major impact on its future”.
The popular heritage centre, which formerly housed ironworks, forges, a distillery, and engineering workshops, is now home to an antiques centre, independent shops and a beer tap.
The centre lost out on £19.5m levelling-up funding in October.
Councillor Sir Stephen Houghton said: “Elsecar has always played an important part in Barnsley’s history, from its thriving industrial past to its unique heritage assets, it’s a place to be cherished and proud of.
“Now thanks to the generosity of the DCMS-funded Arts Council managed Culture Development Fund, significant investment in the village will have a major impact on its future, catapulting it even further to become an internationally recognised visitor destination.
“The £3.93 million funding will make Elsecar a hub for cultural connectivity across Barnsley, for people, businesses, communities and partners. New workspaces, galleries and events spaces will support an innovative new cultural programme that will hugely benefit the borough economically and culturally.
“The funding will also connect Elsecar with new local creative hubs to be established in our Principal Towns, working together with our local communities supporting people to co-produce and take part in local cultural activities.
“These hubs and their activity will have positive impacts on our economy but also on people’s health and wellbeing. The hubs will create a vital and far-reaching cultural network, working to boost Barnsley’s creative sectors in many ways, through employment and partnership working”
Barnsley Libraries has also been awarded £144,375 of funding that will support the transformation of Dodworth Library as part of the Council’s plan to refurbish all community libraries.