The small brick building in a Liverpool terrace that is falling apart and was a place of worship for at least a century is to be rebuilt and restored by the Abdullah Quilliam Society, a private organisation that says the whole project will cost £3m.
Henry William Quilliam opened the mosque on Christmas day in 1889.
He was the son of a wealthy man who converted to Islam in 1887 after a visit to Morocco, adopting the name Abdullah.
The building of his Islamic centre also included an orphanage as well as a printing press in the basement.
The new structure, when work is completed in 2011, will include the restored mosque, a new mosque, a courtyard, museum, art gallery, learning centre for interfaith work, library and cafe. Work is expected to start this month.
The mosque ceased to function when Quillam decided to go travelling in 1908.
But almost 90 years later, Mohammad Akbar Ali, a retired doctor who is now 85, decided to restore the historical structure and created the Abdullah Quilliam Society.
Galib Khan, who is the current chairman of the Abdullah Quilliam Society and lives in Aigburth, Liverpool, said he hoped part of the building could be opened within the next six months.
He said: "It's a heritage site for us. This truly is the birthplace of Islam in Britain. We will start on the refurbishment once we have finalised the lease arrangements with the city council and want to make it into a heritage centre for Islamic culture and interfaith dialogue. "The emergency repairs to the roof will cost about £100,000 and £2.5m still needs to be raised for the work.
The refurbishment work is due to begin this month.