Tuesday's ceremony marked significant site progress on South Kesteven District Council's ambitious multi-screen cinema development on St Catherine's Road.
The building shell and public realm works are due for completion by Christmas 2018, allowing fit-out of the cinema ready for opening during Easter 2019.
Welcoming guests, Cllr Kelham Cooke, the Deputy Leader of SKDC, said: "We will soon have a superb cinema, forming the catalyst for St Peter's Hill.
"Over the last few weeks we have seen early signs that confidence is growing again in Grantham with a number of new shops and restaurants opening in the town.
"This state of the art cinema development will accelerate this growth and continue to provide positive momentum, supporting the town centre, boosting the night time economy and bringing more visitors into Grantham Town Centre.
Council Cabinet member Jacky Smith officiated with a ceremonial spade, and said: "It's great to see our vision becoming a reality, and everyone can now see that this amazing complex is really under way.
"It's going to be a brilliant new facility for Grantham and will bring a lot of people into the town centre. We hope that people will support the films which will be shown at St Wulfram's Church and Grantham Guildhall until the Savoy opens."
Guests included representatives of cinema operators Savoy Cinemas and construction company G. F. Tomlinson.
James Collington, Savoy Managing Director, anticipates welcoming around 250,000 people a year through the doors in Grantham.
"It's great to see such good progress on site already," he said. "We are looking forward to next Easter and launching the Savoy experience.
"It will be the culmination of a long-held ambition for us to be here in Grantham and we promise that Savoy will deliver great films and entertainment."
The cinema's five screens will accommodate a total of 650 seats. Savoy plans a variety of cinema offerings to suit all audiences, from major blockbuster films to live streaming of events, opera and drama from the National Theatre.
Chris Flint, Director for G. F. Tomlinson said: "We're proud to be working with South Kesteven District Council to deliver this exciting scheme that will benefit the local community.
"As a family-run Midlands-based company, we're pleased to be part of the regeneration taking place in Grantham. We're looking forward to working with our partners to make this scheme a success so it can be enjoyed by families for years to come."
With The Reel cinema now closed, St Wulfram's Church shows its first film - The Death of Stalin - on 3 May.
Grantham has a long cinema history. A 1996 wall plaque in the Isaac Newton Centre commemorates 100 years since actor-playwright J. A. Campbell - described as the Founding Father of Cinema in Grantham - opened The Picture House in 1916.
It was the town's first purpose-built cinema and was patronised by a young Margaret Roberts (later Thatcher). The town boasted four cinemas in the 1930s.
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