Elsecar Heritage Centre has received £40,500 from the Heritage Lottery Fund (HLF).
The money will be used to put plans together to restore the Newcomen Beam Engine, believed to be the only remaining engine of its kind in its original location.
Elsecar Heritage Centre has up to two years to submit fully developed proposals to the HLF to secure funding for redevelopment work.
The aim is to secure a bid of over £400,000 to support a plan for a £500,000 project for the village and engine.
Barnsley councillor Bill Newman said: "This is a crucial step in realising the full potential of this special place."
The engine, which was built by John Bargh of Chesterfield in 1795 at a cost of £167, was used to pump water out of the colliery in Elsecar to allow the exploitation of deeper coal seams until 1923.
The engine was later replaced with electric pumps, and remained working until the 1950s.
The site of a former ironworks and colliery is now an antique centre and used by local craftsmen and women as workshops, as well as showcasing the village's rich past.
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