Old soldiers armed with pickaxes began demolishing the Royal Hospital Chelsea's infirmary on Monday.
The building was a later addition to the Royal Hospital Chelsea
Chelsea Pensioners in their red tunics dealt the first blows, before the diggers flattened the infirmary, which cares for vulnerable war veterans.
It was a 1960s addition to the hospital, which dates back to 1692.
The plan is to raise £35m to build a new care home and modernise the Long Wards, designed by Sir Christopher Wren, where the 300 pensioners live.
There were some tears as the mechanical grabber moved in to knock down the building.
Ricky Graham, 84, formerly of the Royal Electrical and Mechanical Engineers, comforted Staff Nurse Bridget Higgins.
She acknowledged the need to improve and change with the times but added: "I've worked in there for 21 years and have so many happy memories."
The building of the hospital was authorised by King Charles II in December 1681 to help old and disabled soldiers.
Sir Christopher Wren designed and erected the buildings, but the infirmary was a 20th Century addition.
It is being replaced with a £20m infirmary to comply with the Care Standards Act while the Long Wards are also modernised.
Bill "Paddy" Fox, 72, who served 38 years with the 15/19 Hussars, said: "I'm looking forward to the change. I want to be here for the next 20 years.
"The other place was quite comfortable, but we need all the facilities of a modern care home."
The fundraising campaign to raise £35m by March 2008 will be launched next month.