When the Victorian artist GF Watts invited a friend to his gallery in deepest Surrey he said: 'Come down to Compton. I have something to show you which I fancy is the way art will go.'

At the time Watts was one of the most famous and influential artists in Britain. His assumption that his legacy - a studio gallery and a collection of 109 paintings - would have a lasting impact on art was not an immodest one.

Yet within 20 years of his death in 1904 he was more or less forgotten by the public, and his work was relegated to the basements and storage cupboards of national museums. During this period it was only the little Watts Gallery, with few staff and a tiny budget, that kept the candle burning.

Happily, interest was revived in time for the centenary of Watts's death last year. Tate Britain put on a show of his large-scale symbolist and allegorical paintings; the National Portrait Gallery offered Portraits, Fame & Beauty in Victorian Society; the Royal Academy had an exhibition of his drawings; and the Watts Gallery hosted the Vision of GF Watts. Watts was back on the map.

The Surrey gallery may yet get its reward for its loyalty in the lean years. Earlier this year it was awarded a £50,000 project-planning grant by the Heritage Lottery Fund. A bid for approximately £5m will be made in 2006 and if it is successful, and match funding is raised, the gallery will be refurbished by 2010.

No doubt those that have made the journey to Compton, near Guildford, will be hoping the refurbishment won't detract from the gallery's substantial appeal. Described as 'one of the most beautiful small galleries in Europe', from the outside it certainly has chocolate-box charm (although the drone of the A3 dual carriageway can be heard in the background).

But it is inside where the real attraction lies. An intriguing object greets visitors - a cast of two hands clasped together as if joined for all eternity. As with many of the objects and paintings in this small gallery, it's the story behind it that captivates.

The hands are casts of Watts and his second wife, Mary. Despite the 33-year age gap between the two, they were devoted, and the gallery acquired their love letters last year (part of the redevelopment plan is to provide an archive for the collection).

Mary was an accomplished artist in her own right, a follower of the arts and crafts movement, who designed the beguiling Watts Mortuary Chapel in the local graveyard - a strange mix of Celtic and art nouveau styles.

She also established a local pottery - this year the gallery was bequeathed a substantial collection of Compton pottery, but doesn't yet have room to display it.

The galleries themselves are arranged along broadly thematic lines and provide an overview of Watts' work: portraiture, landscapes, allegorical works and social paintings.

So far so good; even if they are not to your taste, they capture the period and say much about the fractured society that Watts inhabited. But it is the sculpture gallery that stuns.

The contrast between the dark and shabby corridor that leads to the gallery and the room that houses Watts's sculpture could not be greater. The double-height space was built to accommodate some of Watts's monumental works, and slap bang in the middle is the 4-metre model of Physical Energy.

The man on horseback scanning the horizon was used by Watts to represent the idea of human energy and vitality; the bronze is a familiar landmark for walkers in Kensington Gardens.

All around are miscellaneous casts of hands, heads, feet and faces - the detritus of a working studio. Physical Energy was mounted on a trolley on railway tracks so that Watts could have it wheeled out into the adjoining garden to work on it in the daylight. Unfortunately, the structure is now too fragile to be moved.

Fans of the gallery (more than 13,000 in 2004) need not worry that its eccentric allure will be destroyed. The aim is to refurbish the gallery but keep its character.

The building will be restored; gallery space will be added to display the many drawings; a study centre and temporary exhibition space will be developed, and the physical link between the gallery and the nearby Watts chapel will be enhanced.

And the need is pressing. The condition of the building is increasingly fragile. Work has been done on the roof to get it through the winter months, but it is a temporary solution.

Perdita Hunt, the director of the gallery, says: 'The Watts Gallery has been a sleeping princess. The trick is for us to wake it gently without losing its hidden beauty.'