Sheffield City Region has agreed to give £1.5 million to Rotherham Council to buy the Forge Island area from Tesco.
The grant - which will initially come in the form of a bridging loan - is one of three successful bids from the council.
The other two were for road improvements near Wales, and the purchase of the Technology Centre at the Advanced Manufacturing Park.
Rotherham Council sees the Forge Island area as 'key' to restoring the town's night time economy.
The authority's director of regeneration and environment Damien Wilson said: "We are already seeing interest around this site with new restaurants opening, and plans submitted to the council for further developments.
"We are looking forward to Forge Island becoming a vibrant leisure quarter to complement the existing retail quarter.”
The council hopes to sign a deal to buy the land from Tesco in February, before demolishing existing buildings to make the site more attractive to investors.
Detailed development proposals for the site are currently being prepared alongside the town centre masterplan. An initial draft of the plan is expected in April.
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