The complex is due to open in Autumn 2004

The Shildon Railway Village will be an outpost of the York-based National Railway Museum.

It will house up to 60 historical carriages from the national collection, along with a "living workshop", where local apprentices will be trained how to restore and conserve trains and engines.

The new building will also recycle rainwater for use in steam locomotives.

Education areas, play areas and picnic spaces are also planned.

It is hoped the complex will breathe new life into the former coal and rail village of Shildon, near Durham.

Free admission

The project has received �2m from the European Regional Development Fund as well as grant aid from a number of regional and national funding bodies including development agency, One NorthEast.

It is part of a �70m government funding deal for museums across the country.

Extra cash has also been set aside to allow the new attraction to abolish admission charges for at least three years.

A spokesman for the National Railway Museum said: "Free admission will pave the way for local people to visit Shildon Railway Village as often as they like and for as long as they like to use it as an integral part of their community."

The railway village will also incorporating the popular Timothy Hackworth Museum.