Queenstown will get a new, independent hospital within two years.
The Central Lakes Trust and Southern Cross Hospitals are working together on the project - which will commence in the middle of next year.
Southern Cross has confirmed it will also utilise the hospital for publicly funded services.
"ACC funded patients will also have access to the facilities as will patients with any health insurance or willing to self fund their procedures," Central Lakes Trust chief executive Susan Finlay said in a statement.
The hospital will be located on land adjoining the Queenstown Country Club, on the Frankton-Ladies Mile Highway (State Highway 6).
Southern Cross Hospitals chief executive Terry Moore said the Central Lakes district has been crying out for surgical facilities.
"We believe this will really make a difference, not just for patients in terms of travelling distances but also for visiting family and friends," Moore said.
The new facility will complement the existing Queenstown Lakes Hospital.
National MP Hamish Walker welcomed the announcement of the new hospital, saying with support from the Southern District Health Board, it will provide patients with better access to services.