The funding has been announced by Minister for Just Transition, Employment and Fair Work, Richard Lochhead, during a visit to family-owned timber processing firm James Jones & Sons (JJS).
The £2.79m project will create up to 19 new manufacturing jobs and increase company turnover by around £2.7m over the next three years.
JJS is the UK's second largest timber processing company. Two of its 23 UK plants are in Moray – Forres and Mostodloch – and employ 170 people between them.
The company provides a range of sawn timber products, including carcassing, fencing, pallet wood, I-joists and heavy sections.
JJS also has a long-term commitment to continued capital investment and has led the way in areas such as digital scanning technology and timber treatment.
The Forres site is already the UK's largest manufacturing facility for engineered I-joists used in construction.
In expanding this, JJS is building a new facility to the rear of its existing premises. This will house upgraded processing, engineering and research and development capacity, as well as a new stock yard.
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Insulated roof cassette panels and wall panels are among the products that will be produced in the new facility. This is in response to increased demand from UK house builders developing more new low carbon homes. In supplying these products, JJS is therefore also supporting the country's transition to a net zero economy.
The HIE funding is through the Green Jobs Fund due to the low carbon and energy saving benefits of the project.
Minister for Just Transition, Employment and Fair Work Richard Lochhead said: "The £100 million Green Jobs Fund is supporting businesses in Scotland to create and maintain jobs that support low carbon products and services and contribute to meeting the Scottish Government's net zero ambitions.
"Investing in machinery, equipment and research and development will ensure the creation and growth of new green job opportunities in sectors like the sustainable timber industry.
"In addition to the new green jobs James Jones & Sons are creating, timber innovations like this help reduce carbon emissions and help move Scotland towards a net zero future."
Steve Richards, senior development manager with HIE's Moray team, said: "James Jones & Sons is an important local employer in Forres and contributor to the region's economy. The company is embarking on the next phase of business growth, but this project is about so much more than that.
"It's about innovation, use of new technology and reducing carbon emissions as we move towards a net zero economy. Crucially, it's also about creating many more good quality well-paid manufacturing jobs in Moray.
"We are delighted to be able to support JJS and look forward to continuing to work with the company as they implement these exciting plans."
David Leslie, joint managing director, of James Jones and Sons, said: "This support has not only enabled the development of a difficult area of ground adjacent to the current site, but has assisted with further investment that will significantly expand the production of JJ I-Joists at Forres, offer more job opportunities in the locality and see a further expansion of export opportunities beyond Europe and in addition to the new Australian contract that is under way.
"The company is planning a very significant further investment at its Mosstodloch sawmill over the next five years, which will further increase employment in Moray, develop wood as a product in Scotland and assist in the drive to net zero within the climate change agenda."
