It will also includes plans for improvements to shops, the expansion of walking and cycling links and the creation of more recreational space for children and young people.
The £18.65m funding is not guaranteed, as councils across England are competing against each other for funding.
In a public consultation held in June, 84 per cent of respondents supported proposals to improve the shopping area of Hill Top, while 70 per cent backed a proposal for improving walking and cycling links around Knottingley and 66 per cent supported the creation of a multi-use outdoor recreation area next to Kellingley Club.
New Lidl store in Castleford gets the go-ahead from Wakefield planners
21 of the best hairdressers and barbers in Wakefield, as recommended by you
Lidl wants to extend Ossett store, but neighbours unhappy with plans
Could new Morrison's store in Wakefield be 24/7? 'Progress' on new supermarket for City Fields estate
HMV's new store opening this week at Trinity Walk
The top three play areas residents said they wanted to see (in order) were a play park for small children, green space with seating and a play park for older children.
Coun Tom Gordon, Knottingley ward councillor, said: “I am incredibly proud of the work that has gone into producing this ambitious Levelling Up Fund bid.
“If successful it would deliver what residents of Knottingley and Ferrybridge want – a leisure centre.”
The government will look at the bid against the characteristics of the area, the strategic fit within the Knottingley Masterplan, value for money, whether they can be delivered by 2025 and whether residents support the proposals. The result is expected in the autumn of 2022.
MP, Yvette Cooper has called on the government to back the levelling up fund bid for Knottingley.
She gave her backing to the bid for the town on condition that it included significant investment in new indoor and outdoor leisure facilities.
Ms Cooper who has consulted around 2,000 local residents said, “Over the past 12 years Knottingley has been hard hit by austerity. If levelling up means anything it should mean new investment to help to rebuild services and support across the town.
“ Local people are clear that leisure facilities are key. We need the government to make good on its promises. Knottingley needs a fair deal”.