Wellington's Clifton Cinema closed in 1989 and has stood empty for three years following the departure of the Dunelm furnishings shop to Telford's Forge Retail Park.
Plans to turn the building, which once had 1,300 seats, into an arts venue have been gathering steam, but after a developer expressed interest in turning the site into housing, they received a lift last night.
Wellington Town Council has agreed to give £5,000 to set up a working group to develop a business plan for the future of the building.
Members hope Telford & Wrekin Council will put in a matching amount.
The motion to set up a working group was put to the meeting at the Civic Office in Tan Bank by Councillor Lee Carter.
He said he had met with the Clifton Group last month and was "struck by their dedication, commitment and enthusiasm".
Speaking after the meeting he said: "I was very quick to see the group's vision was being hindered because they cannot get the freehold of The Clifton and it's under offer from a developer.
"The aim of our proposal is to provide a small amount of funding to be matched by Telford & Wrekin Council to beef up the business plan, which will put the group in a better position to go to potential funders to help them get the freehold.
"I am delighted the town council has stepped up to the plate. We want to get things moving as quickly as possible."
But John Alvey, a shareholder in the Clifton group, said: "I think we would all agree, as both council members and members of the public, that it's a most worthy project.
"We need more money and quickly.
"There is an offer on the table."