"Through this project, we'll be revamping the streetscape, making it more welcoming and vibrant so it's a place where pedestrians want to wander and enjoy our heritage and artistic community," Craig said.
"This project will also assist with our economic recovery post-Covid-19, shining a spotlight on Whanganui as an arts destination for visitors from other regions."
Young said Drews Ave was a "crucial connecting route" between public spaces.
"It provides a link from the river and i-Site Visitor Information Centre up to the Sarjeant Gallery and Regional Museum in Pukenamu Queens Park, with creatives, cafes, UCOL and NZ Glassworks en route.
"We'd like to see thriving pedestrian activity between these key cultural areas."
Young said a series of community workshops would be run to co-design and co-create the precinct.
"We're looking forward to engaging with the community for this exciting, collaborative process."
The amount of NZTA funding is not known. A council spokesperson said the council was still finalising the budget with NZTA.
The council will apply for CBD enhancements in Guyton St and Victoria Ave in the next Innovating Streets funding round, which closes at the end of this month.