The Grade II* listed Balkerne Water Tower is the largest surviving Victorian municipal water tower in England.
It will be overhauled and converted into a fully accessible destination with a visitor experience.
Built in 1882 using 1.25 million bricks and 142 tonnes of cast iron, the tower was decommissioned in 1984 and has remained out of use for over 40 years.
Pre-construction works begin this month with the main construction phase due to start in December 2025.
The project is being delivered by North Essex Heritage, which secured a 150-year lease on the tower in 2021.
Funding has come from the UK Government, Colchester City Council, Historic England and The National Lottery Heritage Fund.
Mike Coleman, operations director at McAlpine Special Projects, said the firm would draw on its experience working with historic structures to retain the character and architectural features of the 141-year-old structure.
The design team includes conservation architect Purcell and heritage consultant Focus Consultants.