Scott Whitby Studio has won planning permission to upgrade the art-deco pool, which was built in the Cornish town to commemorate the silver jubilee of King George V.
The project will see the facility converted into a year-round tourist attraction, featuring a heated outdoor swimming pool, an enlarged cafe and bar, and a new community hall.
Architect Alex Scott Whitby said the ambition was to inject new life into an "important and much-loved listed building".
"We hope these proposals will lift Penzance from one of Britain's most deprived areas to become the spa town of Cornwall," he said.
The Grade-II-listed Jubilee Pool Penzance is the largest of just five seawater lidos in the UK.
The triangular site is framed by a series of art-deco buildings. Scott Whitby Studio plans to infill the gaps between them, with new high-performance glazed extensions.
Aluminium-framed bi-fold doors will allow these enlarged buildings to open up to the public promenade, meaning they can be used for a variety of community events and activities.
A new "sculpted" roof will unite the structures. Scott Whitby said this will transition "from a gently undulating form facing the street to a simple projecting roof facing the pool side".
Geothermal drilling will also be carried out, as a way of naturally heating the pool throughout the year.
The project has received funding from the European Regional Development Fund, but an additional £350,000 was required to cover the full cost.
The local community has already raised £225,000 and is hoping to secure the rest through crowdfunding. The campaign is currently being hosted on website Crowdfunder.
Abbie Cranage, chief operations officer for the pool, said the project could change the fortunes of the town, which was once a popular holiday destination.
"We see this as a game changer for Penzance to bring people to west Cornwall all year round and help regenerate the local economy," she said.