The Lord Ashcroft Gallery, due to open in the autumn of 2010, will mark the first time that the 152 medals have been publicly displayed.
The Victoria Cross, which was first awarded in 1856 during the Crimean War, is Britain's premier award for extreme gallantry in the face of the enemy. Of the 1357 ever awarded (all of them to men), only 13 have been granted since the end of the Second World War.
Lord Ashcroft bought his first VC in 1986, thinking it would be a one-off purchase, but it quickly developed into a passion. He established the Michael A Ashcroft Trust to care for the medals, and today it owns over a tenth of VCs ever awarded.
"The new gallery is the result of my fascination with bravery, in general, and the Victoria Cross, in particular, which go back to my childhood," said Lord Ashcroft. "My passion for the VC stems from the fact that it can be won by someone regardless of class, colour, religion, creed or rank - provided they exhibit truly exceptional courage in the face of the enemy."
Collectively, Lord Ashcroft's VCs are worth several millions of pounds, but Queen Victoria never intended the medals to have any intrinsic value. The first was struck from a Russian cannon and they are now fashioned in bronze and hang from a plain crimson ribbon. Their simple decoration features a lion passant atop a crown, with the recipient's name and the date for the act of bravery on the reverse.
The Imperial War Museum currently owns 50 VCs and 29 George Crosses, and these will be displayed alongside Lord Ashcroft's collection in a state-of-the-art space on the top floor.
The gallery will explore the creation of the medals and the personal stories behind the award, such as that of Lieutenant William Leefe Robinson, who received a VC after shooting down the first Zeppelin over British soil during the First World War.
Meanwhile, thanks to the grant from The Art Fund, the Keith Vaughan watercolour with black ink and coloured crayon entitled The Echo of the Bombardment will also become a key part of the Imperial War Museum's collection.
The 12 1/2in x 18 1/4in (32 x 46cm) work, signed and dated 1942, was from a series of Vaughan's drawings and gouaches illustrating the devastation of The Blitz entitled Destruction of the Human City.
It was offered at Christie's South Kensington on July 16 in the 20th Century British Art sale with a £10,000-15,000 estimate but, according to The Art Fund, a number of private bidders had indicated they would step aside if the museum was bidding.
The IWM have been collecting Vaughan's works for 20 years, and were able to secure this one at £34,580, including premium, which was fully covered by the charity grant.
By Stephanie Harris