North West Mull Community Woodland Company (NWMCWC) hopes to buy the Ulva Estate, valued at £4.2million, which spans 2,000 hectares and includes the Isle of Ulva as well as some land on nearby Mull.
If it also wishes to buy Ardulum House on Ulva the cost would be around £4.5 million.
The Scottish Land Fund (SLF) has announced an award of up to £4,415,200 to enable the community to open negotiations for the purchase.
The community has said its main priority is to attract new residents to the island, where only six people currently live.
NWMCWC, the first group to register interest in an island under the Scottish Government’s Community Right to Buy legislation, now has until June 9 to agree terms with the current owner and complete the sale.
Colin Morrison, chairman of NWMCWC, said: “This award from the Scottish Land Fund is hugely significant, not only for Ulva but also more broadly for North West Mull.
“Our top priority is to renovate the existing buildings and provide secure leases for present and new residents and businesses.
“We aim to have 20 or more people living on Ulva within two or three years, rising to as many as 50 or more in time as new houses are built. Social and economic development of Ulva will bring benefits to the neighbouring communities on Mull.
“Schools, shops, local services and industry will all receive a boost from the increased population and also from the increased number of visitors we are confident we shall see once accommodation and facilities are provided for them on the island.”
In December, following an independent ballot of 401 voters in north-west Mull, almost 64% of people were in favour of the community buyout.
SLF is funded by the Scottish Government and delivered in partnership by the Big Lottery Fund and Highlands and Islands Enterprise.
Environment Secretary Roseanna Cunningham said: “Today’s award should provide the NW Mull Community Woodland Company with the means to make a fair and serious offer for the island.
“This is further demonstration of the Scottish Government’s commitment to empowering communities via land reform - enabling them to determine their own futures.
“If the purchase is successful, then I’m sure that the people of Ulva, and its surrounding area, will reap the benefits of community ownership for years to come.”
Highlands and Island Enterprise, previously awarded NWMCWC £23,363 to investigate the purchase and advised them on their SLF application.