The investment will produce a new high quality public realm scheme in the town centre.
The aim of the plan is to make the area more pedestrian friendly and link-up side streets.
The Minister hopes the redevelopment project will also boost economic activity in the town and provide a more adaptable space for outdoor activities.
Ms Ritchie said: "Our towns and cities are the life blood of our communities. I want to create urban areas that offer opportunities for employment, for leisure and for relaxation; shared spaces where people feel safe together."
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"I want to encourage investment in our towns and cities that contribute to our growing economy."
"These improvements will significantly regenerate and re-establish Lurgan. They will help create a high quality town centre in keeping with its original character and appearance."
The total funding package of £2.7m is made up of £2m from DSD and also includes a £600,000 contribution from Craigavon Borough Council with Roads Service contributing £100,000.
Craigavon Borough Council will lead the public realm scheme, guided by a steering group consisting of elected members and representatives from Lurgan Forward, Planning Service, Roads Service, Translink, Water Service and the Department for Social Development.
Mayor of Craigavon Alderman Sidney Anderson said: "Craigavon Council is delighted to be involved with this scheme. This is a substantial investment in Lurgan which ultimately will make a real difference to the character of the town."
(PR/JM)
