Garden Square car park in Hebden Bridge is to be transformed into community and enterprise facilities.
The work, starting in April, is expected to be completed by spring 2012 when the local community will be able to use the new building for meetings, events and enterprise schemes.
The car park, to the rear of Hebden Bridge Town Hall, will be transferred from Calderdale Council to the Hebden Bridge Community Association (HBCA) on January 31.
The car park will no longer be pay and display from January 28 but will continue to operate free of charge until the HBCA takes over ownership.
The HBCA intends to continue to operate the car park free of charge, with a maximum stay of three hours, until redevelopment starts in April.
Peter Hirst, Chairman of Hebden Bridge Community Association said "We are now rapidly approaching the exciting stage when the construction work for the long-planned new facilities for Hebden Bridge gets under way."
Alternative long stay car parks can be found at Market Place, Valley Road, Garden Street and New Road.