The investment, backed by a Regional Assistance Grant (RSA) of £250,000 from Scottish Enterprise, will create the development of a state-of-the-art pallet manufacturing facility.
Scott said the move will keeps 48 jobs in Fife, adding it has also been spurred by other neighbouring businesses expanding at the port.
The project, which has received planning permission from Fife Council, will extend to the refurbishment of existing building and hard standing areas, the relocation and installation of new equipment, and upgrades to local road infrastructure to ensure site traffic avoids the High Street.
The electricity supply to the port will also be upgraded.
Scott Group, which has interests in commercial property and supplies tools, work wear and commercial clothing, said the switch from Rosyth to Burntisland reflects the success of its pallet manufacturing.
And the firm, which has 27 operational sites around the UK, signalled its hope the project will bring more jobs to Fife in the long term.
Managing director Alan Gibson said: "We were founded in Scotland over 25 years ago and maintaining our heritage as a Scottish business is vital.
"We recently restructured our management team at Scott Pallets and confirmed plans for reinvestment in the business to facilitate our continued growth, increasing employment and supporting our customers meet their environmental objectives."
Stuart Wallace, divisional director of Forth Ports, added: "This investment with our partners, Scott Group, will secure important jobs for Fife."