The county town is one of 19 authorities that will receive a share of £1.5 million for a 'mini-Holland' feasibility study, to assess how the areas could be as pedestrian- and cycle-friendly as Dutch city equivalents.
Once the studies are drawn up the Government will chose the best schemes to receive much greater funding to turn the ideas into reality.
The funding is part of a much bigger, £17 million Government pot of cash for new walking and cycling schemes across the West Midlands.
Active Travel England, led by top cyclist, Chris Boardman, will oversee the delivery of 134 schemes, backed by £161 million, which include new footways, cycle lanes and pedestrian crossings across 46 local authorities outside London.
Shropshire and Shrewsbury Liberal Democrat councillor, Rob Wilson, said it was excellent news that could lead to major funding.
"It is not about making Shrewsbury an Amsterdam," he said.
"It is about making it more walk-able and cycle-able.
"Everywhere in Shrewsbury is a 15-minute bike ride from the town centre and when you get there the parking is free. But we have to put the infrastructure in place to encourage people to cycle. This could prove transformative for the town.
"This has come at exactly the right time for Shrewsbury as we look to develop the Big Town Plan and it has been supported by all the political parties."