The £17.6m revamp which aims to double gallery space and visitor numbers will be aided by a £4.5m HLF grant.
The project named 'Portrait of the Nation', will increase the number of items displayed by 350%, plans include a dedicated education suite, auditorium, IT gallery and research centre.
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The gallery which opened in 1889 houses 30,000 portraits and photographs.
Colin McLean, head of HLF in Scotland, said: "New life will now be breathed into this beautiful historic building.
"Treasures that have been stored away for years will be brought out to showcase Scotland's history through the portraits of those who shaped it."
Gallery director, James Holloway, said: "We are delighted with the support from the HLF.
"Their confidence in the scheme is a terrific boost at this critical stage of the project."
Work will begin on Sunday and is expected to take up to two-and-a-half years.
(GK/JM)
