An £88 million facility for adults with mental illness is being constructed at University Hospital Llandough in Cardiff.
The 135-bed facility, named Hafan y Coed (Haven of trees), will unify local adult and specialist services from Whitchurch hospital and the Llanfair Unit.
Hafan y Coed will include a crisis assessment ward, a psychiatric intensive care ward, and an addiction unit. It will also provide neuropsychiatry and supportive recovery services.
Wales' deputy health minister Vaughan Gething said: 'I am delighted to see how this investment will provide a modern, sustainable and purpose-built adult mental health unit on the University Hospital Llandough site. This investment will ensure adults with mental health problems who need inpatient care are cared for in modern facilities.'
Mr Gething emphasised the importance of good mental health care by highlighting the £88 million investment during a time of stretched budgets. He said: 'Everyone knows that money is tight in public services and yet we are still spending considerable capital. There are still significant sums of money being spent around our services.'
The unit was designed in collaboration with service users, to provide the best possible care, Cardiff and Vale University Health Board said. Construction of the facility is expected to be completed in January 2016.
Mental health has recently received a boost in government attention with the introduction of the first ever waiting times for mental health services in England announced earlier this year, along with increased funding to improve services.