Construction work at Ravenhill begins in the coming weeks, on November 26, and will be completed by the summer of 2014.
Three new stands will be built at the Belfast ground in a phased approach that will see capacity rise from 11,400 to 18,000.
Ulster Rugby Chief Executive Shane Logan said: "On behalf of Ulster Rugby, I would like to thank the Minister and her Department for releasing this funding.
"This investment will create a modern, state-of-the-art stadium with the highest standard of facilities for both supporters and players.
"The new Ravenhill will enhance the position of Ulster Rugby in the world game and will greatly benefit the development of rugby in the province."
Ulster Rugby have appointed Northern Ireland-based general building contractor, Gilbert-Ash NI Ltd., to carry out the construction work.
The first phase of the redevelopment will run from November 2012 until June 2013 and will see new stands built at both the Memorial and Aquinas ends of the ground.
It will house a ticket office, a shop, a bar/catering facilities and a new educational facility. The educational facility will promote the benefits of nutrition, a healthy lifestyle and the values of sport.
The new Aquinas stand will be the new family area of the ground. It will provide covered seating for 2,100 people with terracing for a further 1,300 fans.
It will house new team changing facilities, treatment rooms, an indoor training surface as well as matchday media facilities. It will also become the Ulster senior squads new training base with a state-of-the-art gym, meeting rooms and facilities.
Once the Memorial and Aquinas ends of the ground are complete, the second phase of construction will begin.
This will run from July 2013 until August 2014 and will see the demolition of the existing main stand and the construction of a replacement grandstand built to accommodate 3,450 seated spectators with the new promenade providing standing for approximately 3,400 fans.
This stand will also have bar and restaurant facilities. The existing promenade will also be upgraded.
With the increased number of spectators that the new-look ground will be able to hold, Ravenhill will be capable of hosting a RaboDirect PRO12 final or a Heineken Cup quarter-final.
Ulster Rugby is seeking a naming partner for the new stadium and is in discussion with a number of interested parties.