The 45-year-old building in Isle St in the resort's town centre will be modernised, seismically strengthened and have two bedrooms added.
Fire and Emergency New Zealand (Fenz) national property manager Dominic Hare said design work was nearly completed and the build would take at least a year.
"The station is showing its age, and needs to be refurbished and upgraded to meet the needs of the volunteer firefighters crewing the facility.''
The upgrade was part of a national programme to seismically strengthen all fire stations to meet a minimum standard of 67% of the new building standard.
It was aimed to perform to level 4 of the building code, ensuring it could continue operating immediately after an earthquake or other disaster.
The Frankton station was upgraded two years ago, and Arrowtown's station would be upgraded in the next few years, Mr Hare said.
Fenz property project manager for the South Island, Stephen Hill, said a building consent application would be lodged soon, and he hoped construction would start by October at the latest.
Since the station was built in 1974, it had undergone a series of additions, including a second-floor training room and the addition of four bedrooms to complement the original two bedrooms.
The ability to provide accommodation for more volunteers would improve the brigade's ability to respond to incidents, Mr Hill said.
It was the busiest volunteer station in Otago and Southland last year when its crew attended a total of more than 400 callouts to events.
