The endowment, made by investment banker and library chairman John Wylie and his wife, French consul Myriam​ Boisbouvier-Wylie, is one of the biggest in the library's 160-year history.

It will fund a new exhibition space, The Victoria Gallery, which will focus on the history of the state.

The state government announced a $5 million contribution to the redevelopment of the library's eastern end. The project will include reopening the Russell Street entrance for the first time in 14 years, as well as a new cafe, retail and a collaborative working space. A La Trobe Street entry will also be created.

Mr Andrews said that for too long library treasures had had to stay hidden in storage. "The Victoria Gallery will help bring to life the State Library's many collections, drawing locals and tourists alike to one of our most treasured institutions," he said.

"I welcome the generosity of the John and Myriam Wylie Foundation; it is an extraordinary gift to the people of Victoria."

Mr Wylie said the 500-square-metre gallery – on the site of a presently restricted-access manuscripts section on the second floor – would enable more items to go on display.

Among those items are the 5000-signature 1853 gold miners' petition, art by Aboriginal elder William Barak, and first-hand accounts of the Eureka Stockade.

The gallery will have an interactive and multimedia bent, and host items and exhibitions lent from other Australian and international institutions and from private collections. It will also host classical works by Shakespeare, Galileo, Isaac Newton and Geoffrey Chaucer.

Wednesday's announcement is part of the state government's $90 million Vision 2020 redevelopment of the State Library to open up 40 per cent more space to the public. The library must raise one-third of the sum.

In September 2015, the Ian Potter Foundation donated $10 million towards the restoration of Queen's Hall, with the state government pledging $20 million.

Mr Wylie said the library was "the keeper of Victoria's collective memory, a bridge from one generation to the next. We have many amazing, educational and culturally significant treasures here at the library. It's just hard to find them today."

He said the Victoria Gallery "will be a place where the library's unique treasures, the best of the best, will be displayed" and "where Victorians tell their own stories".

Mr Wylie, who is originally from Queensland, said he had lived in Melbourne for more than 25 years. "This city has been amazingly good to my family, and so we like to give back to the city that has provided us with such opportunity," he said.

Ms Boisbouvier-Wylie, who is from Monaco, said she fell in love with the library's architecture, its youthful vibe and sense of history when she first visited five years ago. "I feel the library is a place that connects people, and I am a very strong believer in connecting people," she said.