They have agreed to plough an extra £1 million into the long-delayed project after its cost soared by more than £2 million in less than a year.
It is the second time in just over a year that the local authority has agreed to put £1 million worth of additional funding into the project, which has effectively been put on hold while emergency talks were held with funders.
It had previously agreed by the council to pay £4 million towards the cost of overhauling the Victorian building, which has been home to the Citizens for more than 70 years and was closed down last year for the refurbishment.
Council officials had warned that the entire project could have been in doubt unless a funding gap could be bridged.
Its cost has soared from an estimated £6.5 million when architects were appointed in 2013 to the current bill of £21.5 million.
Other backers of the refurbishment project include Creative Scotland, the Heritage Lottery Fund, the Scottish Government and Historic Environment Scotland.
Kenny McLean, convener of neighbourhoods, housing and public real at the city council, said: "The cultural and community work of the Citizens Theatre is renowned and valued at local, national and international levels, and the investment of the council and our partners will allow this work to continue in its historic home.
"It is important to progress with this work now, and the contributions made by the funding partners mean that this can happen, and we can look forward to the Citizens playing its part in our cultural and social life for many years in the future."
Dominic Hill, the theatre's artistic director, said: "We warmly welcome the news that the council has approved an additional £1 million of funding.
"Our home in the Gorbals has served communities in Glasgow for over 140 years, and this project will transform the experiences of audiences and participants for many generations to come."