Drip Road Post Office is located in the heart of Raploch in Stirling, an area of high social deprivation.
In addition to Post Office counter services, it also features a convenience store and a range of complementary services.
Deputy communities minister Mary Mulligan said:
'Local post offices act as a focal point for the community and when they close down in an area of high deprivation, it can add to the feeling of community isolation. Renovating poor premises like these into an attractive new focal point for public services demonstrates the executive's commitment to social inclusion, supporting community activity and rebuilding respect.'
Postmaster Iain Orr has run Drip Road Post Office for the past four years. In addition to the grant he has invested a considerable sum of his own money into the refurbishment.
He says he is certain that he could not have contemplated carrying out the work without the help offered by the scheme.
'It would have taken at least three years for me to get the money together. That's a long time to spend in shabby premises, with a declining customer base. Now I have the work done and have even been able to raise a bank loan to improve services. It's a dream come true.'
Mr Orr has already recruited extra staff to cope with their anticipated new business. He is hopeful that the new premises will also help revitalize local shops, as new customers are attracted by the improvements.
Mervyn Jones, executive officer representing Scotland on the National Federation of Sub Postmasters, sees the scheme as offering a lifeline to urban sub postmasters.
'It is a genuine attempt by Communities Scotland to mainta in a vital service to deprived urban communities.'
'The importance of rural post offices has been recognized for some time, but those in deprived city areas are equally important. Many deprived urban area residents; particularly the elderly and those on benefits, would be hugely inconvenienced if they had no Post Office available in their area.
'We are delighted that the Scottish Executive are prepared to assist sub-postmasters in continuing to deliver a quality service that is also a vital community lifeline.'
The £2m fund will operate over a two-year period to March 31 2005. Post office Branches classified by Post Office Ltd as urban Post Office Branches and located in the 20 per cent most deprived post code sectors based on the 1998 Scottish index of deprivation and the 2003 and 2004 Index of deprivation area are eligible to apply.
The money is available for implementing capital improvements to the non-post office (ie retail) elements of the business, such as improving access, provision of ICT facilities, better security and the costs involved in starting, improving or modernising the retail business.