Dunedin Hospital will undergo a "complete rebuild", costing more than $1 billion, the Prime Minister has announced.
It will be the biggest build of its type in New Zealand's history, Health Minister Jonathan Coleman says.
Both the services block and the ward block will be replaced, and bed numbers increased across the board.
While the new site is yet to be confirmed, the Ministry of Health has a "strong preference for a city location", Mr Coleman says. It is expected to be opened within 10 years.
Bill English made the announcement during his visit to the current Dunedin Hospital on Saturday morning, which was peppered with protesters rallying against rundown buildings and exhausted staff.
"It is now clear from a thorough examination of the assets that starting again is the most economically efficient, but also the step that needs to be taken to provide the next generation of health services across the south," he says.
"I know that this will be welcome news to people in Dunedin and also the wider southern area."
Mr English and Mr Coleman are scheduled to spend an hour at the hospital on Saturday morning as part of a visit to the South.
Protesters, who got wind of his plans from hospital staff, brought 100 life-size cut-outs of health workers to the last-minute protest.
YesWeCare coalition co-ordinator Simon Oosterman says each cut-out represents 300 staff not being funded.
"The lack of staffing and resources at Southern DBH is a symptom of the Government's $2.3 billion of health underfunding," he says.
"That's the equivalent of 30,000 missing staff and an immeasurable number of people missing out on the care they need, when they need it."
NZN / Newshub.