Dunedin's new billion-dollar hospital will be built on the former Cadbury site.
Health Minister Dr David Clark made the announcement in Dunedin on Friday that the new hospital will be built on the old chocolate factory site and surrounding blocks.
More than a year after its closure was announced, Dunedin's landmark Cadbury chocolate factory shut up shop in March after more than 150 years of production.
"This is a red letter day for the people of the south who have waited too long for their new hospital," Dr Clark said.
"Everyone knows the current hospital buildings are in a bad way, with leaks and asbestos - and they are deteriorating. I'm pleased that after years of delays we are finally on the way to providing the 21st century health facilities the people of the region deserve."
The site was chosen to maintain the compact and central nature of Dunedin's health and education facilities, Dr Clark said.
The Government is in negotiations with the owners of the Cadbury site and has begun the process of purchasing the city block next door to the north.
Last year it was announced the hospital would undergo a "complete rebuild", costing more than $1 billion.
"The hospital will not only be the largest building in Dunedin but also one of the most complex and challenging construction projects ever seen in New Zealand," Dr Clark says.
Construction is expected to start before the next election, working toward being completed in 2026.
"When it's finished the new hospital will be the most modern hospital in New Zealand, ready to serve the people of the south for decades to come," Dr Clark said.