Jerusalem's historic windmill is to be fully restored to its former working condition and launched at the end of August, 119 years after it stopped operating.

Built in the Yemin Moshe neighbourhood in 1857 for the first Jewish settlement outside the Old City walls, the windmill is one of the best known landmarks in the capital. Yesterday, the new dome and two of the four wings were installed, as part of a restoration project established by a group of Dutch Christians, the Jerusalem Foundation and the Jerusalem Municipality.

The structure, worked on for four months with the assistance of Dutch experts, is similar to that of the original mill erected by the 19th century British philanthropist Sir Moses Montefiore, after the Dutch group obtained original plans for the windmill.

Uri Dromi, director general of Mishkenot Sha'ananim, the arts and culture complex next to the Yemin Moshe site, said: "The windmill will operate by wind power with the help of electricity when needed. The grinding of flour will produce foods to be sold in the close proximity. It will also serve as a tourist attraction, especially for those using the site on their wedding day."

Sir Moses Montefiore initially had the idea to build the windmill in a visit to Jerusalem in 1855, intending to break the Arab monopoly on flour mills and to provide work to Jews outside the Old City walls.

It was this venture that led to Sir Moses taking an advertisement in the Jewish Chronicle in 1856, appealing for bakers and millers to help work on the mill.

After failed attempts by Arab millers to sabotage the project, the windmill was ultimately deemed a failure, largely due to the lack of wind in the area, technological difficulties and the advent of new steam mills.

The windmill was eventually abandoned towards the end of the 19th century and it was not until the 1930s when plans were made for its renovation by the British Mandate authorities. In 1948, the British High Commissioner noticed on his way from prayer at the nearby St Andrews Scottish Church that Haganah fighters, a who later became the core of the IDF, were using the mill as a sniping position, and ordered it to be blown up.

However, the mill was left standing when a sergeant sent to bomb the mill only destroyed the upper part, after recognising the Montefiore name from the school he had attended, which had been named after him.

Uri Dromi said: "The mill had been refurbished several times to keep up its façade until a group of Dutch Christians approached us and suggested fixing it and bringing it to its original form."

The inauguration ceremony will be attended by Prime Minister Benjamin Netanyahu, whose office donated money to the project.

Once the restoration of the mill has been fully completed, visitors will be able to watch the wheat grinding and flour producing process, which is anticipated to act as a major tourist attraction.