The institute is due to open in summer 2011
Work is due to begin on a dedicated transplant centre in Tyneside, described as the first of its kind in the UK.
The £30m Institute of Transplantation at Newcastle's Freeman Hospital will include four operating theatres.
Due to open in summer 2011, the facility will eliminate the need to cancel other operations to make way for emergency transplants.
Nick Brown, MP for Newcastle East, broke the turf on Friday afternoon.
The institute will also include critical care beds, general ward beds, and outpatient facilities.
The Freeman Hospital undertakes a significant number of transplant operations each year.
Surgeons at the hospital carried out the UK's first successful heart transplant for a baby and the first single lung transplant in Europe.