The brewery, based at Cairndow on Loch Fyne, has secured grant support, asset finance and a bank loan to fund the project, which will allow it to meet growing demand for its ales.
It said staff numbers will grow by 12 to 28 as a result of the project, in addition to 10 employed during the construction process.
Production capacity will double from 90 to 180 barrels per week once phase one is complete, with the new facility big enough to grow output to 120 barrels per day within five years.
The new brewhouse will be housed in a former sheep shed built in the early 1970s and use British-made brewing technology.
Managing director Jamie Delap, whose parents Jonny and Tuggy founded Fyne Ales in 2000, said the new equipment will bring "even more flavour and consistency" to its beers.
He added: "The new brewery will also allow us to mill malt on demand which will add a new level of freshness to our beers.
"Ultimately what we're offering beer drinkers in Scotland and beyond is progressive thinking that also manages to stay true to traditional British brewing values and techniques."