The further education provider confirmed last year it was working with South Tyneside Council and the borough’s MPs on a bid to relocate its education facilities.
Despite being knocked back by ministers following an application to the Levelling Up Fund, brains behind the scheme promised to keep working on the project.
And the proposals now look to be back on track after the college was named among 62 institutions in line for a share of more than £400 million to upgrade buildings and campuses from the Department for Education.
"This will bring an additional 9,000 people into the town centre, it will be fit for purpose and give our young people the skills they need to access the economy.”
She added: “We’re moving away from traditional retail, we know it’s not going to work in many town centres, but this will be a great town which is a great place to live, visit and learn.”
Asked whether the town would be able to cope with a sudden influx of thousands of extra people once the new campus opens, Cllr Dixon promised “we will be ready”
The £400 million released to upgrade further education colleges is the latest payout from the government’s £1.5 billion Further Education Capital Transformation Fund.
The scheme is intended to provide specialist facilities for automotive, ICT, science and engineering courses, as well as replacing “buildings in poor condition”.
Bosses at South Tyneside College have previously said the plans would “support the revitalisation of South Shields’ high street”.
South Shields MP Emma Lewell-Buck broke the news to her social media followers on Twitter, with her announcement later re-tweeted by Education Secretary Nadhim Zahawi.
She said: “It's no secret that my view always was that 365 was never the solution to the challenge of regenerating our town centre.
"The success of this important new funding bid is an opportunity to start developing a completely refreshed vision, with input from myself and from the residents of our town who desperately need a thriving and relevant hub where they can not only learn, but shop, eat, socialise and enjoy our amazing and unique area of South Shields.
"There is a very long way to go to build on this bid, but I will continue to champion and support any business or organisation who can contribute to, invest in, or promote our town centre.”
Minister for Skills Alex Burghart said: "Our priority is making sure that every student receives the high-quality training needed to secure a well-paid job, so that businesses in growth sectors such as construction, engineering and digital have a strong talent pipeline as we continue to level up opportunities across the country.
“That is why we are investing to ensure colleges can create modern, fit-for-purpose spaces that meet the needs of students and the communities they serve – and most importantly continue to be fantastic places to learn.”
South Tyneside College has been contacted for comment.