Prime Minister Tony Blair conceded that there was "much, much more to be done" to improve the state of the NHS.
But he said that during the party's first term, it had "laid the foundations" by removing deficits, introducing a building programme, recruiting more staff and creating new services.
"The real failings of the Thatcher period were gross under-investment in the NHS and failure to renew it for a modern age," he told a news conference.
He went on to make several key pledges:
Mr Blair also promised to recruit 20,000 extra nurses and 10,000 more doctors, adding that the Tories had not pledged any extra NHS staff because of "their programme of cuts in investment in our public services".
"I don't believe any government can give leadership to this country unless they intend to invest in health," he said.
"The choice is not simply a question of investment or tax cuts - it is a central question of credibility. Conservative policies would mean a return to deficit financing."
Mr Blair said the Tories had not held a single press conference on the health service so far during the campaign.
Health Secretary Alan Milburn said workers in the NHS did "a brilliant job often in difficult circumstances".
Outlining how the NHS university would work, he said it would be modelled on the work of British and US corporate universities.
It would be established by 2003, and would provide all NHS staff with basic information about the organisation as well as patient care.
Other subjects would include communication skills and the ethics of healthcare.
Mr Milburn said ancillary staff would be able to acquire skills to become healthcare assistants while healthcare assistants could become therapists.
Staff will obtain credits which will lead to the award of qualifications including diplomas and degrees.
But while Nick Harvey, Liberal Democrat health spokesman, commended the idea, he said it "did not address the core issues of pay and working conditions".
"A new university will not prevent the haemorrhage of existing staff to the private sector," he said.
"New training places are the real measure of commitment to the NHS.
"Creating more posts without more training places simply leads to more vacancies."