Bakehouse Close and Riddle's Close - once home to philosopher David Hume - are among those selected for a makeover by Edinburgh World Heritage.
Fleshmarket Close, which is famously a setting for an Inspector Rebus novel, has also made the final list.
Lighting and artwork will be installed in the little-used closes.
The people behind the project hope the improvements will encourage more people to use the historic network of narrow streets.
Adam Wilkinson, the director of Edinburgh World Heritage, said: "Our aim is for this project to re-connect the people of Edinburgh with the closes of the Old Town.
"The intricate network of closes and courtyards that bind the Old Town together gives it a unique identity, is underused but has the opportunity to be revitalised, used and celebrated by all."
The closes date back to the medieval origins of the city.
Originally, individual plots of land were set up lining the main street, with paths to gain access to the land behind.
As each plot became built up over time, so they developed into narrow lanes connecting courtyards and streets behind the Royal Mile.
The Twelve Closes project was welcomed by city leaders, including John Thompson, of the Old Town community council.
He said: "This is a project to be welcomed, changing dilapidated and neglected closes into useful routes linking different parts of the Old Town.
"The closes were once busy thoroughfares, buzzing with all the life of the city, and it would be wonderful to see some of that atmosphere return."
Twelve of Edinburgh's "dilapidated and neglected" closes are to be transformed as part of a major project to improve the Old Town.