City councillors have agreed to transfer Hull Screen to the Reel cinema in St Stephen's in the New Year.
The council-run cinema has struggled since moving from Hull's Central Library to the University of Lincoln's Savile Lecture Theatre in George Street three years ago.
Under the five-year deal, Hull Screen will operate from one screen in Reel, with others being made available for festivals.
Councillor Kalvin Neal, cabinet member for culture, said: "Although the officers had recommended closure, we wanted to give Hull Screen every chance to survive and flourish. Hopefully, this is the best way forward."