A development application for the building has been lodged with Orange City Council.

The extension will increase the gallery's exhibition and storage space, creating a new triangular-shaped wing between the current building and Peisley Street.

Gallery director Brad Hammond said the roof of the new exhibition space was designed to allow ambient natural light into the art gallery while avoiding any impact for art works on display.

"Rather than relying on only artificial lighting, the design of the roof and ceiling lets us fully control sunlight in the exhibition gallery," he said.

"We have a significant collection of artworks.

"This funding will ensure we can better protect and grow our significant collections and lead to our permanent collection being on display more often."

The existing facility will be extended by 1070 square metres incorporating a new gallery exhibition space, new storage and conservation areas and a theatrette.

"The addition of a 77-seat lecture theatre will be major boost for community education in this precinct," Mr Hammond said.

The extension is being funded by the state government which granted the project just over $4 million through the first round of the Regional Cultural Fund in August 2018.

Once planning approval is granted and tenders are called it is expected construction will be completed by the end of next year.Orange Mayor Reg Kidd said he was delighted the project was progressing.

"Following discussions with the community last year when the grant was announced, Sydney firm Architect Marshall has been engaged to take the concept to completion" he said.

"We're now at the point where the plans can go to the planning assessment stage."

Cr Kidd said the art gallery was among the cultural features of Orange.

"Our city's cultural life is one of the main drawcards to bring more people to live and work in Orange," he said.

"Our gallery needs more exhibition and storage space so it can better reflect the changing cultural needs of our growing region."

The lodging of the DA follows a community consultation process that included a public meeting in May attended by about 50 people.