Ditchling Museum of Art and Craft missed out on being named 'museum of the year' after the Yorkshire Sculpture Park was crowned with the lauded title.
The winning entry was described by Art Fund judges as a "truly outstanding museum with a bold artistic vision".
The park, situated in the grounds of Bretton Hall in Wakefield, was first opened to the public in 1977.
It scooped £100,000 for winning the competition.
Ditchling museum made a national shortlist of six finalists for the prize following a £2.3 million revamp.