Model of new John Radcliffe Hospital
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The Oxford NHS has received £135m for the development of a new children's hospital.
The money will also pay for a new wing at the John Radcliffe Hospital.
The redevelopment will allow services to be moved from the Radcliffe Infirmary, which is due to close in 2007.
Construction of the new building to house paediatric services and the John Radcliffe extension will begin in 2004.
Trevor Campbell Davis, chief executive of the Oxford Radcliffe Hospitals NHS Trust said: "This is an important milestone in an exciting period of change and redevelopment for the Trust, and excellent news for our patients and our staff.
"We look forward to working with our partners as we build our new facilities in the next three years."