The Burnley-based bed and sofa manufacturer has awarded a £2m contract to Barnfield Construction for the building and development of a 52,000 sq ft storage facility at Primrose Mill.
The new facility will allow Sweet Dreams to receive all deliveries to the one site, and also to expand production operations and create a permanent showroom.
Sweet Dreams' owner and managing director, Riaz Ahmed, said: "We chose Barnfield Construction because of their considerable experience as well as their keen price and excellent specifications. We also like to work with local companies wherever possible, so that is a bonus."
Tim Webber, chairman and managing director of Barnfield Construction, said: "We're pleased to have won the tender to develop Sweet Dreams' new extension in Burnley. Sweet Dreams have some exciting new contracts in the pipeline and we look forward to working with them as their company continues to grow."
Sweet Dreams was established in 1988 and who now employs 150 people. Divans and mattresses remain the company's core product, but last year it started manufacturing sofas and chairs.
The new building should be completed later this year.