A new era of creative prosperity opened in Shepherd's Bush on Friday when it was announced the historic Bush Theatre will move to the old library in Uxbridge Road.

Its new home overlooks Shepherd's Bush Market and forms the centrepiece of the council's regeneration plans for the area - but threatened traders are furious at the overall vision for the area and confronted the authority at a meeting on Thursday night (see story below).

The theatre, which has been housed above O'Neill's pub since it was founded 38 years ago, will open its new doors in September next year after artistic director Josie Rourke agreed a deal with Hammersmith and Fulham Council.

She called the agreement, a leasehold which will run for a minimum of 125 years, a 'huge moment in the life of the Bush Theatre'.

The move will allow its capacity to be expanded from 81 seats to about 150, as well as incorporating a cafe and bar for the first time, offices and greater rehearsal space. The theatre has been using the building, which is owned by the Church of England, as a script library since the council axed the original library in 2009.

Ms Rourke told a gathering of actors, journalists and councillors on Friday morning that the new building will ensure the long-term success of the theatre.

She said: "This has been the ambition of a number of directors for many years so this is a huge moment in the life of the 'Bush' and a great validation of the unbelievable hard work of the team.

"It's the most gorgeous building and an incredibly welcoming space and our theatre is going to become so much more visible.

"It is going to allow us to engage with the community like we have always wanted to do."

She added its current home would not be forgotten and pledged that its 'spirit' would be transferred to the new space.

"Incredible things happened there and it's important to acknowledge the spirit it had – it represents a lot of what Shepherd's Bush is about and I want to put some of that spirit into this building."

The theatre's co-founder, Nicholas Newton, said: "This is a fantastic development and I'm really pleased.

"We always used to wonder if we'd survive, so this is a great feeling."

Meanwhile , under-fire council leader Stephen Greenhalgh says the new theatre will form the centrepiece of his vision for the new Shepherd's Bush Market – but threatened shop-owners confronted him over his controversial plans for the area at a stormy meeting last week.

According to Shepherd's Bush blooger Chris Underwood, about thirty locals voiced their opposition over the plans, which involve demolishing the Victorian line of shops to create a new 'cultural quarter' encompassing a plaza, new shops and cafes and the new theatre.

Mr Underwood said the petitioners slammed Mr Greenhalgh for labelling their shops 'shabby' and mocked him for his insistence the council is consulting with them over its ambitions.

And they cried 'shame' and 'disgraceful' when the meeting was called to a halt, added Mr Underwood.

Earlier they found support from opposition Labour leader Stephen Cowan, who lambasted Mr Greenhalgh and his cabinet for not posing any questions to the petitioners.

The following morning Mr Greenhalgh attended the unveiling of the new theatre and seemed unfazed by the rumpus, instead expressing his delight at the new development.

He said: "We are thrilled to have agreed this deal with the Bush Theatre. Bush at the library will provide a cultural focus for any future market regeneration and will bring a sense of excitement and increased footfall to the area.

"We are looking forward to breathing new life into the market and we can't wait to secure the Bush's future with this move. This really is great news for Shepherd's Bush. The area now has a brand new, state-of-the-art library at Westfield and a new home for the much-loved Bush Theatre."

A council spokesman said there were only ten protesters at the meeting.