The family-owned company, which employs 200 people at its current 175,000sq ft factory in the centre of Nelson, has secured planning permission to demolish the former Primrose Hill mill next door and build a new plant, offices and warehousing.
The new facility, which should be completed by September, will be part of the current site and will initially be used for warehousing, with production lines added as the firm expands.
"We're desperately short of space at our current site and are having to rent warehousing, so it will be good to get everything under one roof," said MD Philip McIvor.
"In the longer term we may add gluten-free production lines to the unit to have a dedicated flour-free area. We're growing at around 5-6% a year and quite a piece of that is coming from gluten-free."
Celebrating its 50th anniversary this year, Farmhouse Biscuits manufactures a range of traditional, gluten-free, sugar-free and seasonal tins of biscuits, supplying department stores, gift shops, farm shops and garden centres, as well as local Asda stores.
It also supplies own-label biscuits to Morrisons and exports goods to Australia, North America and Europe.