The cathedral launched its 'once-in-a-century' development project "Lichfield InSpires" in April this year following its application to HLF at the end of March.
The application was considered by the HLF Trustees to be an outstanding, high priority heritage project, but owing to HLF's reduced funding, the trustees were able to support only two major national projects.
The cathedral learnt that, of the 13 major projects considered, five were of the required significance, quality and urgency, and that all five projects were to be funded before the government made cuts in finance for the heritage sector.
"Lichfield Cathedral is proud that its project was one of these five," said a spokeswoman for the cathedral.
"The cathedral is immensely grateful for all the professional support, advice and encouragement it has received from the HLF regional staff throughout the last two years, and is only sad that reduced levels of Government funding prevented the HLF from supporting all the projects it wanted to fund."
The Very Rev Adrian Dorber, Dean of Lichfield, said of the result, "It is good to know that in normal circumstances Lichfield InSpires would have passed, with flying colours, all the tests for Heritage Lottery funding. The acknowledgement by the HLF Trustees that we have a cracking project is welcome.
"We are determined to look after Lichfield Cathedral and ensure more people experience its beauty, its great history and its spirituality. We'll press on with our plans, realising they will take longer to accomplish, but we are resolute in our aims."
Mr Timothy Pain, Chief Officer of Lichfield Cathedral, said he was disappointed that the government had only made £9 million available for major national heritage projects and that no project in the Midlands was funded.
"We will now look forward as we seek to renovate, restore and rejuvenate this incredible medieval masterpiece for the people of the West Midlands," he said.
"Our plans for 2009 remain unchanged. Obviously we will not be able to proceed at the same speed, so our intention is to deliver Lichfield Inspires over a longer timescale.
"To put this into some perspective, the great 19th century restoration of the cathedral lasted over 50 years".
The Cathedral is now looking forward to October 15th, as the project has been shortlisted for the UK Design Award in the planned building category.
