A theatre plagued by financial uncertainties is celebrating a three-year reprieve after Arts Council funding secured its short-term future.

Exeter's Northcott Theatre has repeatedly faced funding cuts – but yesterday its work was at least temporarily assured with a share of a £750,000 grant designed to bring the "very best" theatre to the city.

The Arts Council has invested £250,000 for each of the next three financial years, in a bid to breathe new life into Exeter's theatre scene.

Of that, the Northcott will receive a total of £375,000, which will enable it to develop a year-round programme. It is hoped the award will help attract further funding to secure its activities in the longer term.

But the theatre will still have to manage a significant drop in funds when its annual £500,000 grant comes to an end.

Kate Tyrrell, Northcott's executive director, hailed the "fantastic" funding news, adding: "It's been a tricky few years for the Exeter Northcott Theatre and the talented team here have shown exceptional professionalism and commitment throughout. It's extremely exciting to at last have some good news and be able to plan with confidence for the future."

In 2010, the theatre went into administration, and made around half its 80 staff redundant, amid fears it could close. Last March it was told it would not be among 15 organisations in Devon to share an £11 million cash pot over three years. The Arts Council then invited applications to funding specifically to benefit Exeter's theatre culture.

Also to benefit is Exeter theatre consortium Kaleider, which will receive more than £360,000 to develop a theatrical and cultural programme for Exeter. Part of its brief will be to create theatre in unconventional places for audiences who may not regularly attend theatres.

Theatre Alibi will also receive more than £13,000 over three years to provide rehearsal space for Exeter theatre companies.

Phil Gibby, Arts Council England's South West director, said: "Exeter will be established as the home of a vibrant and diverse theatre ecology and theatre makers will be proud to be working here."