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Regeneration Minister Margaret Ritchie said the extra money will allow the project to be extended to New Row, alongside the work already completed in Church Street and Kingsgate Street in the town.
"I want our urban regeneration projects to deliver shared public space, places that people from all communities can access and enjoy and this is another example of that," said Ms Ritchie.
"Coleraine will benefit greatly from this extension of public works as this kind of regeneration makes our towns places which provide opportunities for all, visitors, residents of rural areas and the town dwellers themselves," she said.
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Ms Ritchie said the inclusion of New Row will provide an important link between the prime retail frontage in Coleraine Town Centre and the Abbey Street development site.
The scheme in New Row will involve the replacement of the main pedestrian surface, the replacement of the existing street furniture and the planting of trees.
It will also involve the introduction of an integrated lighting initiative with the erection of street lighting columns.
Mayor of Coleraine David Barbour said: "The extension of works to New Row ensures our pedestrianised town centre is more user friendly, while attracting families of all ages to shop in the area."
Ian Donaghey, Chairman of the Coleraine Town Partnership, said: "We recognise that it is essential to continue the refurbishment work in preparation for the proposed development schemes at Abbey Street and the Mall to create an environment where people want to come and shop."
The total package of £1.3m is made up of just over £1.2m from the Department for Social Development and also includes a £66,000 contribution from Coleraine Borough Council with Roads Service contributing £25,000.
(PR/JM)
