Construction is to begin on a new £43.6million hospital with a private room for every patient.
The Royal Victoria Building (RVB) in Edinburgh will specialise in elderly care, dermatology and rheumatology.
The facility, to be built on the grounds of the Western General Hospital, will be the first of its kind to boast all single rooms for patient privacy, NHS Lothian said.
The announcement came as funding was approved by the Scottish Government.
Jackie Sansbury, director of strategic planning and modernisation, said: "We are delighted that the final stage of planning has now been completed and we can start building this state-of-the-art facility for patients in NHS Lothian."
The RVB will stand on the site of the former Paderewski Building which was bulldozed to make way for the facility.
It is due to be completed in 2012 after being given the green light by the Scottish Government's Capital Investment Group (CIG).