The National Rehabilitation Hospital in Dún Laoghaire is to get a replacement 120-bed facility.
It is expected to be completed within three years.
The purpose-built facility is being funded by the Health Service Executive and the National Rehabilitation Hospital Foundation.
Details of the development, which was included in the HSE's capital plan published earlier this year, were announced by Health Minister Dr James Reilly and Tánaiste Eamon Gilmore at the hospital.
The facility will help patients with complex and specialist rehabilitation in single rooms to minimise infection risk.
The Sisters of Mercy Board of Management said it hopes to have the contract to build the facility in place in one year.
Construction will take two more years. An exact cost is not yet available. This is phase one of the development.
Subject to further funding, phase two will see the remaining therapy and support services relocated to the new development.
The hospital deals with a range of conditions, including spinal cord injuries, acquired brain injuries and also provides prosthetics and limb absence support.
It secured planning permission for a new €200m 235-bed facility in late 2008, but the funding did not become available.
