Chief Minister Adam Giles says the Northern Territory Government has picked a site for a new "full-service" hospital in the outer Darwin area, and will announce the proposed location within days.
Mr Giles says a site previously proposed for a hospital at Palmerston has been abandoned because it is not big enough for the facility the Government wants.
He says the new hospital will have a "full suite" of services, and construction will start in about 12 months.
The Government also plans to keep the Royal Darwin Hospital.
"I think that we will have a state of the art, brand-new, big, whiz-bang hospital that can service everybody," Mr Giles said.
"But I don't think you throw the baby out with the bath water.
"We have got a very good facility at Royal Darwin Hospital, a lot of research institutes and so forth out there.
"I think we can manage to keep Royal Darwin Hospital and invest in RDH on a continuing basis."
The Australian Medical Association (AMA) says the Government has not consulted with doctors or nurses over its planned new hospital.
AMA NT president Dr Peter Beaumont says Darwin does not have a big enough population to sustain a second full-service hospital or enough medical professionals to staff it.
"It is very very difficult to get enough doctors, nurses, enough allied health workers, to the Northern Territory as it is," he said.
"If services are diluted across two hospitals in Darwin, it will be a nightmare.
"It amazes me that the consultants working on the strategic [hospitals] plan would be able to advise the Chief Minister so quickly on this when they don't seem to have consulted the doctors or nurses about it."