The Miller brewery, which once had the capacity to make 8 million barrels of beer a year, closed in September 1994.
It reopened as an ethanol plant operated by Northeast Biofuels in 2008.
That failed in 2009, and the plant was purchased by Sunoco, which resumed making ethanol there in June 2010.
When it becomes operational in 2017, the plant will be able to supply more than 2,000 tons of barley malt each year, said Erin Tones, marketing and logistics manager for 1886 Malt.
The state's farm brewery law, approved in 2012, has been credited with the surge in the number of craft breweries in New York state in recent years. It provides tax and fee cuts and eases some regulations for brewers who use New York state-grown or produced ingredients.
As the number of farm breweries has soared past 100, the demand for New York-grown barley and New York-produced barley malt has also grown. Some brewers have had trouble finding enough New York malt.
The malt house is expected to cost more than $9 million to build and develop. Of that, $700,000 is coming from a state grant for the project is part of the $500 million in state aid awarded to Central New York last year. The grant is part of Gov. Andrew Cuomo's $1.5 billion Upstate Revitalization Initiative.