The staff have been chewing their fingernails and the rest of us have been waiting with bated breath but finally it’s time to celebrate - the William Morris Gallery in Walthamstow has been announced as the winner of this year’s £100,000 Art Fund Prize for Museum of the Year.

Transformed from local gem to world-class attraction, the gallery has been awarded the prestigious title and prize fund for its major renovation and creative reinterpretation of the life and work of William Morris, the revolutionary Victorian textile designer, artist, poet and social activist, for a diverse range of 21st Century audiences. It beat off competition from the Kelvingrove Art Gallery and Museum in Glasgow, the BALTIC Centre for Contemporary Art in Gateshead and the Hepworth Wakefield gallery in West Yorkshire.

It’s a marked transformation for the much-loved but tired gallery that was at one stage facing cuts and, it was feared, closure at the hands of the local authority. But, following a community campaign, Waltham Forest Council agreed to invest £1.5million, matching the £1.5million offered by the Heritage Lottery Fund, and the gallery reopened in August 2012 following a major redevelopment with transformed gallery spaces, fantastic new education facilities and an orangey-inspired extension overlooking the grounds – engaging schools, the local community and a national audience like never before.

A new temporary exhibition space allows collaborations with leading artists and since reopening, the gallery has seen almost 100,000 visitors through the door.

The phone is ringing off the hook in the gallery’s press office, fielding calls from all the national broadsheets, news channels and local press. “It’s brilliant news,” “Amazing,” and, delightfully, “We’re absolutely cock-a-hoop!” abound.

“We were overjoyed to be nominated for the prize, so to actually win is absolutely breathtaking,” said Chris Robbins, Leader of Waltham Forest Council. “The competition was fierce and, given the calibre and diversity of the other museums, it’s a real testament to the vision of the council, the Heritage Lottery Fund and our other partners that we came out on top.

“Given the financial challenges councils are facing money is obviously tight, but we’ve made a commitment to the William Morris Gallery and ensuring its transformation forms a cornerstone in our ambitious regeneration plans for Waltham Forest.

“We’re now deciding what we’ll spend the money on and I can guarantee that it will make a real, tangible difference to the gallery itself and to the experience of visitors, whether they live in Walthamstow, come as part of a school visit or have travelled from another country to explore Morris’ extraordinary vision.”

From 1848 to 1856, the Georgian house in Lloyd Park in Walthamstow was the family home of William Morris, who lived there with his widowed mother and his eight brothers and sisters, from the age of 14 until he was 22. William wrote some of his earliest poetry seated in the tall window on the main staircase.

Plans to establish a gallery dedicated to the Arts and Crafts Movement master were first made in 1914, and the gallery was opened in 1950 by Prime Minister Clement Attlee. One of the first visitors through the door was Queen Mary, whose husband, George V, had given Morris & Co, William Morris’ decorating firm, the Royal Warrant for its contributions to the 1911 Coronation.

One of the Art Fund Prize judges, artist Bob and Roberta Smith, lives in Waltham Forest and has long been a fan of the gallery. “William Morris had such a powerful vision of art and how it worked for all humanity, and it was amazing to see his house re-imagined for the 21st Century.

“The gallery at one stage was going to be closed and it shows how just a few really imaginative people in the local authority can use the vision of a man like William Morris from the past, from the Victorian era, to say something really powerful and relevant about art for all people living now. It was a really great project, very heartening. It’s just brilliant to make that museum alive again and tell that story.”

The William Morris Gallery, Lloyd Park, Walthamstow is open Wednesday to Sunday, 10am to 5pm. Details: 020 8496 4390, wmgallery.org.uk