DEMOLITION of the Pethard building is underway as part of the new Bendigo Hospital project.
The Pethard building is near the corner of Lucan Street and Bayne Street.
"It opened in 1964 and was originally used as nurses' quarters," a Bendigo Health spokeswoman said.
"It has been vacant for a while and it's part of making way for the construction of the new hotel centre complex that is part of the overall new Bendigo Hospital precinct masterplan."
Demolition of the building started this week.
She said the new Bendigo Hospital project was on track for completion in 2016.
"This is all part of it," the spokeswoman said.
"As you may be aware there was some demolition works months and months ago as part of the enabling works to get the site ready.
"But everything's still on track.
"Everything is on schedule."
Premier Denis Napthine officially turned the first sod on the New Bendigo Hospital project recently.
Dr Napthine said the project was progressing quickly.
Dr Napthine said work to prepare the site started immediately after contracts were signed with the Exemplar Health consortium in May.