Pendle Council has acquired Brierfield Mill for £1.5m from local charity Islamic Help using a grant from the Homes & Communities Agency.
The building has been transferred to the council's joint venture company with Barnfield Investment Properties, called Pearl 2.
Islamic Help's plans to turn the mill into a girls' school failed after it couldn't find funding and the canal-side mill's condition was deteriorating.
Cllr Mike Blomeley, leader of Pendle Council, said: "It's fantastic news that we've been able to buy the building at no cost to the council. The Homes & Communities Agency gave us 100% of the money needed to buy it.
"The Mill was independently valued and we think we've given a fair price for it. It has really exciting potential as a landmark development for Pendle."
A new arm of Pearly 2 has been created specifically to lead on the regeneration of the Mill.
The Grade 2-listed 380,000 sq ft mill complex sits on a seven-acre site next to the Leeds-Liverpool Canal and is expected to take ten years to fully renovate.
Bids for further funding from government and the European Union are expected to follow.
Tim Webber, chairman or Pearl 2 and managing director of Barnfield Investment Properties, said: "As a Pendle company we're passionate about the Brierfield Mill complex. It has fantastic potential."