The new building and slipway at Larkstone will have a café, changing facilities and be a base for Ilfracombe Pilot Gig Club, Y-Sail and Ilfracombe Canoe Youth Club.
The contractors working on the North Devon Council (NDC) project are due to be announced soon and it is expected to be completed by next summer.
Funding has come from the Government’s Coastal Communities Fund following a bid by the council.
The council is confident the build will have little effect on the surrounding community or wildlife and it is being built out of season to minimise disruption.
Some road closures are expected during the construction but public access to the existing old slipway will be unaffected.
Isabelle Bromham, NDC’s watersports development officer, said the new centre was part of the regeneration plan for the town and was one of the first projects to actually deliver.
She said: “This might be a catalyst for other projects taking shape – if investors see something like this they may take more of an interest in the town.
“Everyone is a winner – visitors will be winners and so will the local community groups.
“We have done a lot of community consultation and with businesses. Everybody has been supportive so it’s nice to finally be able to deliver.”
The café will be open to all and is expected to have a stunning view of the harbour. The council will be inviting operators to bid to run it.
None of the clubs to be based there have ever had their own clubhouse before.
The council’s senior regeneration officer, Jo Barnard, said the new centre would have a minimal disruption on the area and was in a prime location for watersports.
She added: “It has been designed to be accessible for everybody’s needs and there will be a disabled drop off right outside the centre.
“Part of the aspiration is to bring back life to this part of Ilfracombe that has been abandoned for some time, so hopefully this will bring people down to this area.”
Councillor Pat Barker, executive member for economic development and regeneration, added: “We have been working very hard on this project and I’m really pleased that we should see this fantastic new facility taking shape soon.
“There are at least three local watersports groups in the town who are desperate for a base and this centre will really transform their activities and make it so much easier for them to access the water. There will also be a café and toilets, which will mean the cove will be more appealing to walkers and those who want to sit and enjoy the spectacular views across the bay.
“Water sports are already a massive draw at some of the districts other resorts including Croyde, Saunton and Woolacombe, but the facilities in Ilfracombe have been lacking. Hopefully it will be the catalyst for more outside investment and be a big boost to the town, expanding its outside appeal whilst also giving the local community an asset they can enjoy all year round.”