The cash windfall has been offered to the Bilston Remembered group which is battling to raise £80,000 for the project.
The War Memorials Trust – WMT – has agreed in principle to provide 75 per cent of funding up to a maximum of £30,000.
Local councillor Steve Simkins, who is a member of the group, said: "This is fantastic news and just what we wanted to hear. It has added a lot of momentum to the scheme."
The funding will be used for the restoration of the original railings and walls around the town centre memorial which fronts on to Oxford Street. It could also be used to restore the bronze sword and damaged sections of Portland stone.
The grant follows a £1,000 donation from the West Midland Police Proceeds of Crime Fund and the £575 raised by a revival after 30 years of the New Year's Day football match between Bilston Town and Darlaston Town.
Coun Simkins said: "Both of these donations were marvellous gestures and gratefully received. Some of that money will go towards the cost of staging further fundraising events.
"We are hopeful that we will get the full £30,000 from the WMT and the work will be done on the memorial as part of a rolling programme with the money being spent as we get it.
"Hopefully, it will all be completed so that the memorial is restored to its former glory by 2018 – the centenary of the end of the First World War."
The improvement work has already started with footways resurfaced, together with shrubs and foliage removed.
Derek Simpkiss, chairman of the Bilston branch of the Royal British Legion, said: "This is fantastic news. I can still remember standing with my mother and grandmother and watching the Remembrance Sunday parade when I was three or four years old.
"Very little has been done to the memorial over the years. It has been allowed to fall into a terrible state of disrepair and was in such poor condition that it almost stood as an insult to those who fell, rather than the tribute it is supposed to be."
"Those people died for us and we owe our lives to them, so the least we should do is to endure they are remembered with pride."
Branch treasurer Peter Murphy said: "It looks better already after the shrubs and foliage were removed and hopefully that is the first step on a complete renovation.
"The news of support from the War Memorials Trust is very welcome."