A spokesman of the Chandigarh administration Friday said that the acting institute would be the first of its kind in this region after Delhi.
It was being set up following a suggestion by noted filmmaker Yash Chopra who is the chairman of the city's advisory committee for setting up a film city here.
It would cater to students from Chandigarh, Punjab, Haryana, Himachal Pradesh and Jammu and Kashmir.
An agreement between Anupam Kher's Actor Prepares company and the society for tourism and entertainment promotion (Steps) is likely to be signed here later this month.
The administration would provide space for the acting school in the premises of the central craft institute in Sector 11 here. Classes are likely to start in April for the one-year course.
The setting up of the acting institute is in line with the administration's move to promote the city as a destination for filmmakers.
Kher was a student of the Department of Indian theatre in Panjab University here nearly three decades ago.