Two classroom blocks will be refurbished while new classrooms and administration spaces will be built. There will also be a new early childcare centre and gymnasium, she said.
"[It will be] a modern learning environment complete with IT infrastructure," she said. "It will take us into the 21st century, we won't have to play catch up."
Mrs Bird said she hoped the new school environment would lift spirits and the way students felt about themselves.
She said building work was due to get underway in March and should be completed by the start of 2015, all going to plan.
Rotorua MP Todd McClay said the investment would work to improve education in Murupara and grow the school's roll.
"Over the past few years there has been increasing concern over educational achievement in Murupara and a large number of students leaving to attend school elsewhere. As a result we saw the closure of Murupara Primary School and Rangitahi College and former Minister of Education Anne Tolley support the community's request to establish the Murupara Area School at the start of 2013.
"Principal Mandy Bird and the entire teaching staff, board chair Jacob Te Kurapa and I have worked collaboratively to make a case for a new school to the Ministry. This decision is very good for Murupara and shows the government's ongoing commitment to education in this town," Mr McClay said.
"Better infrastructure and learning facilities will create the modern learning environment Murupara students deserve. This major redevelopment will ensure their school facilities provide the best environment for these students to flourish."