All existing 47 bedrooms at the George Hotel will be refurbished.
In addition, St Nicholas House across the road from the George Hotel will be converted into a 44-bedroom extension of the hotel.
Work is expected to start in the early New Year.
The George Hotel is a 500-year-old former coaching house. It is the oldest hotel set in the heart of Colchester, reputedly England's oldest city. It is around 100 yards from Colchester Castle.
A Roman road runs beneath the George Hotel. The refurbishment plan includes opening up the cellar exposing the remains of the Roman road for public viewing.
The George Hotel also features the Courtyard Brasserie and two events suites both with natural daylight and technically well-equipped. The Tudor Room will accommodate 50 delegates theatre style and leads out to the hotel courtyard. The County Suite will accommodate up to 70 delegates theatre style.
