The proposed centre will be either an add-on to an existing classroom block or, depending on funding, it could be built from the ground up, board of trustees deputy Chris Clark said.
"It's a matter of how much support we get from the community and how much money we raise," Mr Clark said.
The centre is the school's "next project" after two classrooms are to be built during summer for use in term two next year.
The school's board has been looking at several Otago schools to investigate what would best suit Arrowtown's roll and needs.
"There are a lot of interesting things going on around Otago at other schools with their similar [arts and performance] centres.
"The school is really strong in that area, and that part of the curriculum will be fulfilled a lot better with such a facility."
The centre will be used for drama, music, kapa haka, rehearsals, band practice and will also provide teachers with a larger room to take classes in larger activities, such as dance lessons.
Mr Clark said the school was in a "gifted position" with the teachers it had, and the centre would help optimise their potential.
Architectural drawings for the performing arts centre have not yet been finalised, but Mr Clark said it was something the board had been working on over the past few months.
Money raised at next Saturday's school fair would go towards the new centre.
