The two-storey store will cost $90 million to build while the hotel will cost $70 million. It is expected to be open in 2021.
Bunnings has confirmed more than 180 team members are expected to be employed at the new warehouse when it opens, with more than 700 people involved in the construction.
It will span more than 11,000 square metres including two levels of basement parking with 335 spaces, a playground, cafe and click and collect services.
Bunnings acting general manager property Garry James said Bunnings was excited to contribute to the area.
"We identified a need for Bunnings in the Doncaster area and this site provided an opportunity to build something in line with Manningham Council's vision for Doncaster Hill," he said.
"We are always looking at opportunities to innovate the design of our stores and we have a number of different formats that cater for the local markets where we operate.
"There's no cookie cutter approach – we always assess the local need and what can be achieved in a space, regardless of whether it is 4000 or 20,000 square metres."
The unusual project was originally planned as a Bunnings-apartment complex hybrid before an amended permit to replace 100 apartments with the hotel was approved by Manningham Council in June, the Manningham Leader reports.