The former home of Cardinal Wolsey, next to Southwell Minster, has got through the first round of the Heritage Lottery Fund's (HLF) restoration application process.
It will now receive £155,000 from HLF and be able to apply for a further £1m to support its restoration plans.
The palace rests on part of one of the largest Roman villas in the country, and was where the surrender of King Charles I was organised by his Scottish captors.
The building is now partly in ruins.
The Great Hall within the palace is in regular use by the Minster's young choristers, visiting school parties and community groups from across Notts.
A proposed wide-ranging revamp of the Great Hall will include the tackling of structural problems and decorative decay while improving public access. The ruins will be stabilised and the whole palace, once renovated, would be more widely available as an education and community resource.
The Dean of Southwell, The Very Reverend John Guille, said: "These initial funds are a fantastic boost and will enable us to begin planning for the work to preserve and restore this hidden historical gem for future generations and for the wider benefit of the community now. I am deeply grateful to the Heritage Lottery Fund for this development award."
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