The Ffestiniog and Welsh Highland Railway - the UK's longest heritage line - completed the £1.3m redevelopment of Porthmadog Harbour Station in 2014.
Work on the new station, which it is hoped will increase visitor numbers by 5,000, could begin in winter 2016-2017.
The railway said the hunt for funding was "now happening".
Since the railway opened in Caernarfon in 1997 - initially running just 3 m (5km) to Dinas, before extending to Porthmadog in 2011- its station has been a temporary structure.
Dafydd Thomas, chairman of the Welsh Highland Railway Society, said: "The plans for a new Caernarfon station building continue to make progress and the detailed process of gaining the necessary funding is now happening."
The development will use land already occupied by the railway's temporary station and car parks.
It will create extra jobs and safeguard existing ones, the railway said.
A historical steam railway in Gwynedd has unveiled the latest designs for a new £2m station in Caernarfon.