The City of Greater Bendigo has thrown its financial support behind a living history museum, which is proposed to be housed in the former post office building in Pall Mall.

Rotating exhibitions could begin as early as next year.

News of the council backing brings to head a six-month campaign by The Advertiser and The Bendigo Miner to find a home to display the city's extensive collections, the life's work of 18 separate heritage groups.

A preview of council's forthcoming budget includes $350,000 as a down payment on the new gallery and a further $400,000 in the next financial year would underwrite a big overhaul of the large northern wing of the historic building.

A supporter of the project, Cr Rod Fyffe said the gallery would fill a major gap in Bendigo, preserving the past for future generations.

"This will be a fantastic way of showcasing Bendigo," Cr Fyffe said.

"It will give people a greater understanding of our heritage and also our contribution to the region, our state and the nation.

"It really shows, I think, the commitment of this council to the heritage of this area." Cr Fyffe said that three exhibitions a year, as at Bendigo Art Gallery, would keep the new centre vital and encourage return visits.

"The beauty of this is that we have a stunning iconic building right in the heart of Bendigo, as is," Cr Fyffe said.

The concept would cash in on the ready-made crowd of 90,000 people a year already passing through the visitor information centre doors.

Changing exhibitions and gala opening nights would increase the drawing power of the venue for local audiences.

Cr Fyffe gave credit for the push for a new history museum to local groups, whose dedication to Bendigo’s heritage, as caretakers of collections, would fill the exhibition spaces.

"This brings them together and gives them a common purpose," Cr Fyffe said.

"They are still custodians of their own interests but they are part of a much bigger picture."

Leading Bendigo historian and Historical Society president Jim Evans said groups acting as custodians of Bendigo’s past were delighted by the new exhibition opportunities.

"While there are museums, there is not one that talks about the history of Bendigo as a whole," Mr Evans said.

"The Advertiser was instrumental in its campaign for this history museum.

"It builds on the very successful Snapshots (at Bendigo Art Gallery), which attracted 12,630 people."

Exhibition proposals are being gathered by the gallery team, who will manage the new centre.

They will include periods such as the gold rush, Bendigo in the (world) wars, a history of small regional towns, and indigenous and Chinese history.

City Futures director Stan Liacos and his team have worked with consultant architects on solutions to maximise the exhibition space, at the same time enhancing the heritage values of the building.

Preliminary plans propose a glassed-in foyer, to be shared with the visitor information centre.

A major entrance to the history collection, on the right though to the main gallery space, will feature the room’s high ceilings and hardwood floors, and will take advantage of the building’s natural light.