A regeneration masterplan drawn up by Durham County Council for Crook aims to support retail development and improve the town centre environment.
Local groups are to be invited to bid for a share of £568,000 to improve community facilities in the town, about 10 miles south-west of Durham.
Durham County Council's cabinet agreed the money should be made available to improve a range of facilities across the town.
The county council will be seeking expressions of interest from community, voluntary and not-for-profit organisations from next month.
Councillor Neil Foster, cabinet member for regeneration and economic development, said: "Crook is a main service centre for the surrounding rural communities.
"There is a lot of potential for developing town centre retail opportunities, encouraging the building of new housing and supporting business growth.
"We need to ensure that the community are involved with decisions that affect them and that the resources used in Crook produce lasting benefits."
Improving access to services, facilities and shops in the town centre is a key priority set out in the masterplan.
It includes creating new and developing existing business space for small and medium sized businesses, and improving pedestrian access.
Councillor Brian Stephens, cabinet member for neighbourhoods and local partnership said the authority would by working with the Three Towns Area Action Partnership.
"We will be working with local groups and residents to ensure that this funding is used in a way that improves facilities in line with the wishes of the community.
"Building on the success of previous similar schemes, this is a great opportunity for local people to influence how and where money is spent."
The council cabinet will discuss the masterplan on Wednesday (18 April).