The Mangere Refugee Resettlement Centre will be rebuilt at a cost of $5.5 million over the next four years.
The new 192-bed facility will be built using a public-private partnership procurement model and the Government will lease the buildings back.
The money to be spent will include the cost of leasing and maintaining the new building.
Many of the buildings at the centre, which were built during World War II, have been deemed beyond repair after being left to deteriorate.
Immigration Minister Michael Woodhouse said the upgrade to the 160-bed facility would come from this year's Budget.