The $22.9 million upgrade to Wangaratta Hospital will be completed in November 2022, Victorian Health Minister Martin Foley announced on Thursday.
Mr Foley and Member for Northern Victoria Jaclyn Symes said 60 new jobs would be created by the development.
The project will deliver a 12-bed critical care unit, an eight-bed short stay unit, a new paediatric ward and addition beds to create two 20-bed medical units.
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It will also upgrade the emergency department.
Funding for the project was announced in March 2018. At the time it was expected work was due to begin in 2019 and take about 18 months.
"Wangaratta locals and all those in the North East deserve first class health services and the jobs they bring - and that's exactly what we're delivering," Ms Symes said.