The Bullingdon Community Centre in the Lye Valley was built in the 1940s, but structural engineers said the prefabricated structure with concrete block walls needs extensive work.
Oxford City Council has provided the money to improve the hall and grounds.
Richard Bryant, Bullingdon Community Association secretary, said the money exceeded expectations.
Props have been installed to make the hall safe for the time being.
The association will carry out a consultation with residents on what they would like to see in the new facility, with building work expected to start early next year.
A community centre declared no longer fit for purpose will be resurrected with a £500,000 renovation.