The transformation will include a multipurpose hall, new library, meeting rooms, community kitchen and emergency relief centre.

Cardinia Shire mayor Bill Pearson said it was the largest grant the shire had been given in years and would create a community precinct for the future.

"I'm very happy we got this funding that, through the $86 million development of this area in the next two years, will provide up to 1000 jobs."

Federal minister Anthony Albanese said the project would deliver an appropriate facility for a growing community.

"The overall project will replace the existing library, which reached its capacity in 2001, and deliver a facility that can be used for emergency and bushfire relief operations," Mr Albanese said.

Cr Pearson said sale of the current library site, built in 1991, had paved the way for an $80 million retail precint.

The new library development site will become a central community hub.

"We've got the Pakenham pool, skate park and now the new library, community hall and state-of-the art facilities in one central location," he said.

"This has secured the future of the PB Ronald Reserve forever and a major social and recreational precinct."

Redevelopment work is set to begin before September 1.