The Great Central Railway's plan for a new museum, to be built in Leicester, is expected to cost £15million in total.
Alongside the proposed £10million lottery grant, submitted to the National Heritage Fund, £5million of additional match funding would be required.
A striking building is planned for construction, alongside the Great Central Railway's Leicester North station where the museum will be connected to the running lines, allowing for inter-changeable displays.
Drumming up support for the project, City Mayor Sir Peter Soulsby said:
This is a really exciting opportunity to create a heritage railway centre of national standing in Leicester...
...The museum will house items which are of both national importance and local interest, complementing the nearby National Space Centre and Abbey Pumping Station, helping to enhance the city's reputation as an important visitor destination.
The proposed railway museum to be built in Leicester could create up to a thousand new jobs.
An economic impact study, carried out as part of the £10million funding bid, suggests the project will be worth £43million to the local economy over five years.
Leicester City Mayor, Sir Peter Soulsby, has called it an exciting opportunity to enhance the city's reputation as an important visitor destination and said:
"It will create hundreds of new jobs, both during construction and on opening, while providing training opportunities in the rail industry for dozens of young people. We're fully committed to this project and will be working with the Great Central Railway to help them deliver this ambitious scheme.
Along with 300 short-term construction jobs, annual visitor figures are expected to reach 230,000, and so additional spending could create more than 900 jobs for the surrounding area.
The Great central Railway have submitted a bid for £10million to the Heritage Lottery Fund. for the building of a new railway museum in Leicester.
Filled with priceless artefacts from the national collection, the new attraction will be based at GCR's terminus in Leicester North.
Plans for the new museum have been described as "world class" and Managing Director of the Great Central Railway Bill Ford said:
This is a visionary project. In the last 12 months the partners have worked hard to prepare the funding bid. The museum will help people reconnect with Leicester's railway story and our shared heritage. Together with our thriving steam line, we're confident tens of thousands of people will visit every year.
The Great Central Railway is helping children experience what it was like to be a Second World War evacuee. Children are dressing up in 40s-style clothing and former evacuee Maisie Walker is sharing her experiences.
The 83-year-old joined the children to share her memories of leaving her home in London in 1941.