The school, Kirn Primary School, will be constructed on the current site and will be part funded by a contribution from the local authority, as well as Scottish Government funding.
The decision follows a consultation with the local community on two other options for primary education in the town, which included a three-school campus on the current St Mun's site, or a two-school campus with Dunoon primary school refurbished.
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Argyll and Bute Council's Policy Lead for Education, Councillor Aileen Morton said: "We have a great opportunity to invest in our schools at the moment with the Scottish Government funding that is available. Today we have agreed to make the most of this opportunity and make sure that Dunoon is able to benefit from it.
"During the consultation the community made its views clear. We're now taking forward a proposal that ties in with the views expressed and that is deliverable. As well as making sure that Dunoon doesn't miss out on the investment that's available, this proposal ensures that the community will have a brand new school which will help it meet its aspirations.
"I can assure the people of Dunoon that high quality education for all pupils in the community remains a key priority for us."
A new-build Kirn Primary School is expected to have a roll of 350 pupils, plus 30 nursery spaces. The anticipated total cost is £6.68m, of which £3.35m is Scottish Government funding, in addition to a contribution of £3.33m from Argyll and Bute Council.
(JP)
