The new Banksia will be built on a site so close to the Tamworth hospital they will look like the same building complex, according to one campaigner.
Joan Wakeford hopes building the new unit to blend in with other health services will help break down the stigma attached to mental illness.
Her comments came after Hunter New England Health CEO Michael DiRienzo announced on Friday that the new building would be built physically connected to the Tamworth hospital's emergency room.
It will be constructed on the site of the existing Rotary Lodge carer accommodation units, he said.
Joan Wakeford, a founding member of the Tamworth Mental Health Carers' Support Group, said she hoped the new building will even be painted the same colours - timber and orange - as the main hospital.
The new design will also save patients the potentially embarrassing and stigmatising journey in an ambulance from the hospital emergency room to the Banksia unit, just a few dozen metres away.
Member for Tamworth Kevin Anderson joined Mr DiRienzo to make the announcement on Friday morning.
"We're heard the voices of the mental health carers' support network in relation to the location, that it needs to be close to the emergency department," he said.
"So that in the middle of the night when things are needed - services are required - that it is very close at hand and it can be provided very quickly."
Mr DiRienzo said the new facility would be "integrated" with the main hospital.
And the health CEO gave the clearest timeline yet for the construction of the new institution.
The co-design process for a detailed design of the new institution will begin in 2021, he said.
He hoped that would take less than a year.
"If we can knock it over in six months, we will knock it over in six months. We'd like to move as quickly as possible. I think the community have waited long enough," he said.
"I don't think there will be any issues here and we'll move as quickly as possible.
"We'd would all be very hopeful that we can start turning some soil over in no more than 12 months after that."
He said construction of the new facility should take about 18 months.
Carer's group President Di Wyatt said she was "overjoyed" by the announcement of the site, and they were keen to get the job done as fast as possible.
"We've waited three years [for this] and we just want to see that new centre built as fast as possible."
The Rotary buildings will be rebuilt elsewhere at taxpayer expense.
The new Banksia will contain 33 beds, eight more than the current institution. It will also have the potential for a courtyard and outdoor areas, which campaigners consider a vital therapeutic element.
There is still no estimate as to how much the new institution would cost.
In 2018 the Tamworth Mental Health Carers' Support Group collected 12,000 signatures demanding a new Banksia Mental Health Unit. Mr Anderson promised the construction of a new institution in the run-up to the 2019 state election.
Campaigner Joan Wakeford, who has a son who struggles with a mental health problem, said she would be involved in the co-design process "until I die".