The Government has committed more than $45 million to a new "state of the art" Children's hospital in Wellington, scheduled to open in early 2021.
The Government's contribution almost matches that of Wellington property developer Mark Dunajtschik, who last year committed $50m to the new hospital.
Health Minister David Clark said the current hospital was almost 30 years old with services located in different parts of the regional hospital.
"This is not ideal for children or families who are already going through a stressful time, nor for hospital staff who want to provide the best service for their patients."
The new hospital will hold all these services under one roof.