Brothock Mill, previously home to the Arbroath Herald, is undergoing conversion by Muirfield Contracts under the direction of the Caledonian Housing Association.
The project is expected to take 60 weeks to complete.
The housing association has received grants totalling £730,000 from the government to help fund the rebuild.
The remaining £2.3m will be secured through private borrowing.
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The Association's asset management director Mr Andrew Kilpatrick, who is based in Perth, said he was happy to see the work under way.
Caledonian have confirmed the original facade, roof and most of the structural floors will be retained.
A single element of timber flooring which is located at the seaward end of the building will be replaced.
As a result of the heavy machinery and substantial weight the old mill building will have tolerated throughout the years, the main floors have been designed to remain robust and strong.
According to modern building regulations, however, cast iron pillars will be required in order to meet fire safety guidelines.
Mr Kilpatrick said: "Once all the structural changes have been completed, the rear wall will be rebuilt and a new stairwell and lift will be installed."
The building will provide a total of 20 flats over three floors, with all dwellings being affordable rental properties "suitable for mature tenants."
(IT/GK)
