The U.S. Department of Agriculture package will include $900,000 in low interest loans and a $225,000 grant.
Residents in the INO and Damascus areas have complained of low water pressure.
Under the plan, the small lines will be replaced with much larger six and eight-inch lines. The city will be able to offer water to more than 50 additional households living outside the water district.
The actual upgrade of the New Brockton Water System is expected to get underway later this year.