The authority will invest £200,000 in maintenance work on the Victorian building in a bid to attract a private investor to take over its management.
The money will be spent on repairs to the roof, the building's electrics, and on a new fire alarm system.
A spokesman for the stallholders' association said it was vital to keep the market running.
Councillor Nick Wallis, Darlington Borough Council's member for markets, said: "The authority remains fully committed to the future of the indoor market but inevitably a building of this size and this age costs a great deal to refurbish and take it to the next level.
"Many markets are now operated by the private sector, and we will now identify the best possible partner to come in to operate it and bring in additional finance.
Robin Blair, from the stallholders association, described the funding as "a bit of a lifeline".
He said: "We are not in a position to run the market ourselves, so the main thing is we've got to keep this as a market."
A lifeline has been thrown to Darlington's indoor market to allay fears that it was in danger of closing.