The two-storey facility will be built on land next to the historic hospital building, which dates back to the 1850s.

At their meeting on Wednesday night, councillors approved a permit for the works with only minor alterations to the proposed conditions for access to the site.

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It marks a significant step forward for the site, which has sat idle for years.

The facility will have places for 120 children, the developers have said.

"The building would include five childcare rooms, an infant care room, and a central area of the building containing the reception area, kitchen, and staff/meeting room at the upper floor area, with the lower floor area providing for services including water tanks, maintenance/store rooms and bin storage," councillors were told in a staff report.

The shire has also received an application to develop an aged care facility on a different part of the same site.

That application will be assessed and considered separately.

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