The provincial government announced Wednesday that a new mental health facility to replace the Waterford hospital will be built on the same site.
The new hospital will be constructed on the east side of the current building. The government says several administrative buildings and houses just east of the existing hospital will be demolished.
It also says patient care services at the hospital will not be affected as the new hospital is being built.
A tender has been issued to prepare the site next year.
The construction of the new hospital is scheduled to begin in 2016.