Work is due to start in March at the company’s wastewater treatment works (WTW) to the south of the town.
The upgrades will take up to three months to complete. Northumbrian Water’s partner, Esh-Stantec, will carry out the work.
All work will take place within the site’s boundaries.
Northumbrian Water’s Project Manager, Dean Thompson, said: “Our upgrades at Stokesley WTW will allow us to apply even higher standards to the treatment of the area’s wastewater.
“While the work we are doing will take place on our site, customers in the area can keep track of progress online at www.nwlcommunityportal.co.uk