The new Central Mental Hospital looks set to be built in Portrane in north county Dublin.
The Department of Health is now believed to have chosen Portrane, having examined a number of different sites.
Speculation that the new Central Mental Hospital would be located on the site of St Ita's Hospital had been strong since the Government decided to abandon its controversial plan to build it near the proposed prison at Thornton Hall in Dublin.
The Portrane site, where there is extensive land available, would come at no cost to the exchequer.
Due to the financial constraints within the health service, it was felt that a site already owned by the HSE would be preferential, according to the Irish Medical News. It said it had been informed that "the Department of Health has chosen Portrane as the location of the Central Mental Hospital".