The move follows the closure of the St Catherine's Road Car Park to make way for the town's new multi-million pound cinema complex.
Welham Street multi-storey, with its 328 spaces, will now open from 7am through to 11.30pm to cope with increased demand for parking during busy periods in the evenings and at weekends.
Cllr Jacky Smith, South Kesteven District Council Cabinet member for Major Projects, said: "The St Catherine's Road car park was well used outside normal working hours, so we have extended the opening times at the nearby Welham Street Car Park and opened up all levels in the evenings.
"This is backed by free parking after 6pm each night for people visiting the town whether it's to shop, dine out or attend events at the Guildhall Arts Centre."
Cllr Smith said the site off St Peter's Hill was the most logical, attractive and deliverable location for the new cinema as the land is already owned by the Council and is close to the town centre and SKDC's largest car park.
She said: "The development will regenerate Grantham and help attract significant inward investment to the town. Specifically, the complex will add to the local leisure offer and attract upwards of 200,000 visitors a year, increasing economic activity in the town centre and wider area."