Drama students at Neath Port Talbot College, Neath, will use the centre to rehearse and perform. The theatre will also include an exhibition and practice space.
It is being built with a contribution of £1.4m from the Welsh Assembly Government programme 14-19 Learning Pathways, which aims to give young people a wider range of educational experiences.
Jane Hutt, education minister at the Welsh Assembly, visited the theatre on Friday (23 May). She said: "This substantial investment from 14-19 Learning Pathways highlights the Welsh Assembly Government's commitment to transforming learning provision for young people throughout Wales.
"It aims to provide a more flexible and balanced approach to education, giving a wider range of experiences to meet the diverse needs of young people."
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