The collection, which includes Gaelic language documents, works on early Celtic culture and examples of Celtic art, is to be secured for the future following a £100,000 award from the Heritage Lottery Fund.
Hundreds of documents will now be shipped to the mainland from Iona Abbey, the 6th Century monastery of St Columba, for restoration with the project due to take two years to complete.
The library will become a new visitor attraction at the historic seat of Christian worship, which played a key role in the spread of the religion across Scotland.
The collection’s catalogue will also be put online to reach the widest possible audience.
The Chairman of the Iona Cathedral Trust, Very Rev Dr Finlay Macdonald, said: “We are delighted this gem of a library can be made more accessible and our valuable heritage preserved thanks to this support from the Heritage Lottery Fund.
“Iona Cathedral attracts many visitors, but the library is hidden away over the cloisters. Many more people will be able to enjoy it thanks to this grant.”
The library was restored between the 1930s and 1960s during the rebuilding of the Iona Abbey claustral buildings by George Macleod and the Iona Community.
Its earliest contents date from the 17th Century with the Church of Scotland describing the collection as having “national significance.”
Despite its importance, the library remained hard to access with the condition of some of its contents deteriorating over time.
Historic Environment Scotland, the Iona Community, the University of the Highlands and Islands, as well as the Island of Iona Community Council are working together on the library project.
Lucy Casot, Head of HLF Scotland, said: “This is a great project that, thanks to the National Lottery players, will transform the Iona Abbey Library Project for future visitors and encourage everyone to enjoy its amazing heritage collections. Heritage Lottery Fund is delighted to give its support.”
The island of Iona regularly attracts more than 130,000 visitors each year with the abbey still holding services today.
The Iona Cathedral Trust was established by a Deed of Trust in 1899 by the eighth Duke of Argyll who made over the Cathedral and all ecclesiastical grounds and buildings on Iona to the trustees in perpetuity, with variations in 2004 and 2010.
It is currently leased to Scottish Ministers with Iona Abbey managed on their behalf by Historic Environment Scotland.