The state will remodel the Montana Historical Society building and add a connected building to create the new Montana Heritage Center.
Advocates of building a larger museum at a new site have said the state didn't have enough room to display all of its artifacts.
A state official says keeping the museum across the street from the Capitol in Helena will cost less, offer more parking and make it easier for visitors to also tour the Capitol.
Ground work is expected to begin this spring, even as the building design phase continues. The 2019 Legislature passed an increased lodging tax to help pay for the project.
