News: British architecture studio Caruso St John has won a competition to restore and expand one of Sweden's most significant 20th century buildings – the Stockholm City Library by Swedish architect Erik Gunnar Asplund.

Caruso St John will pick up the baton for the library project, which has been on hold since 2009, after being selected as "the most qualified" firm for the task of developing one of Sweden's most important public buildings.

Unlike the previous scheme – which was scrapped following funding issues and protests from heritage groups – Caruso St John's design is being pitched as a "restoration and restructure", rather than an entirely new extension.

The studio's proposal focuses on the reorganisation of the building's internal spaces, which will be re-planned to help the library adapt to contemporary demands.

"The project will involve work to the annex and bazaars as well as to the main building, and will be carried out in collaboration with Scheiwiller Svensson Arkitektkontor," said a statement from Caruso St John.

Work is expected to start on the building in 2017, and be completed by 2019.

"Asplund has always been a central reference for our work, as an important figure who managed to reconcile the demands of modernity with the city, and as an exceptional designer and builder," Adam Caruso, co-founder of the firm, told Dezeen. "It is a privilege for us to work in what is probably his masterpiece. We are also looking forward to collaborating with an incredibly dynamic public institution."

Inaugurated in 1928, Stockholm City Library was designed by Erik Gunnar Asplund to be one of the world's most modern and accessible libraries and was the first in the country to offer public access to the stacks.

The orange structure is considered an exemplar of Nordic Classicism – a pre-war movement that was instrumental in the development of Modernism in Sweden, Norway, Finland and Denmark.

The design was influenced by Asplund's study tour of America's public libraries. The main lending library is housed in a cylinder in the middle of the building, accessed via a grand staircase, and is surrounded by three wings with flat roofs.

The building has remained popular with residents but has struggled to keep up with the changing behaviours of library users and an increase in footfall from the nearby Odenplan plaza. It is now also in need of major maintenance work, according to the city.

In 2007, German architect Heike Hanada won one of the largest ever open architecture competitions to design an extension to the library – a project that then had an estimated budget of £60 million.

Hanada, an architecture teacher at the Bauhaus University in Weimar, was selected from 1,160 entries by a jury that included Adam Caruso, co-founder of Caruso St John. But the scheme was scrapped in 2009.

"The politicians say that it is too expensive. That is the official reason. But there is discussion on whether this is true," Annika Jensfelt, an editor of the Swedish Association of Architects' magazine Arkitekten told architecture newspaper BD in 2009. "Important cultural people have debated it, saying it is spitting on Asplund. Perhaps this is the true reason."

Caruso St John has established a name for itself as one of the UK's best firms for designing public institutions. Last year it completed a £45 million renovation of London's Tate Britain art gallery and the firm is currently working on a new gallery to house the collection of British artist Damien Hirst.

"Caruso St John Architects is most qualified for the task. They have a recognised expertise in working with cultural and historical buildings and public buildings containing cultural activities," said Juan Copovi-Mena, Stockholm City's property director.