An Bord Pleanála is expected to announce its decision on an application to build the hospital on the Mater site in Dublin in January.
Dr Reilly said enabling works would take place next year, with building commencing in 2013. He said it would be unwise to give an estimate of the cost as the tendering process had not been completed.
National Lottery funding would ensure that they would have enough money to complete the project.
“The development and opening of this hospital will not be contingent upon charitable donations,” said Dr Reilly, but donations would still be welcomed.
Children in Hospital Ireland, who welcomed the minister’s announcement that the development would go ahead, said it had waited 16 years for such good news.
The minister said an investment of €1.95bn in state funding, or €390m a year, would be made in health infrastructure over 2012-2016.
Mr Reilly said in the region of €40m a year was being put aside for investment in information technology.
The national project for radiation oncology was still being evaluated as to whether it should be funded by way of a public/private partnership, but money was available to develop it.
He said there was a huge challenge in maintaining buildings and maintaining and replacing hospital equipment, but that would be met as well.
He said funding would also enable his department to contribute to two significant infrastructure projects — a clinical research facility at University College Hospital Galway and a replacement blood transfusion facility in Cork.
He stressed that the €11m being given to Tallaght Hospital to meet a budget deficit would have to be repaid next year.
He said it was not possible to give any more detail about his department’s spending plans because internal discussions were continuing in regard to the capital allocations