CONSTRUCTION has started on the long-awaited $10 million Castlemaine hospital redevelopment.

Minister for Health David Davis and Treasurer Kim Wells today marked the start of construction works, honouring the Coalition Government's election promise to the local community.

"Back in 2010, we promised to fund a $10 million upgrade of Castlemaine's hospital and today we are here to deliver on that promise,'' Mr Davis said.

"This hospital has long been in need of an upgrade.

"After all, the hospital is 100 years old and located in a number of disjointed buildings on the side of a steep hill.''

Ballarat-based Nicholson Construction will undertake the building works.

Mr Wells said the upgrade would drive economic activity in Castlemaine and was expected to create 36 new construction jobs.

"The Victorian Coalition Government has a clear strategy to plan, build and deliver the infrastructure Victoria needs,'' Mr Wells said.

"This modernisation is part of a record $5.6 billion infrastructure investment we are making in Victoria this year.

"Not only will it dramatically improve patient care, but it will also drive economic activity and create local jobs.''

Mr Davis said the redevelopment would include the relocation and refurbishment of the accident and emergency department.

"It also includes a second emergency theatre to be used as a procedure room, a modern day surgery ward and recovery area and an improved front entrance,'' Mr Davis said.

"The new design and refurbishment will make it easier for Castlemaine staff to do what they do best care for patients."

Mr Davis said while the refurbishment was undertaken, a number of patients would have to travel to other medical facilities to receive treatment.