James Packer’s Crown Resorts will build a five-star hotel across the road from its Melbourne casino.
The company will build the project in a 50-50 joint venture with construction firm Schiavello Group, and has so far paid $50 million on four pieces of land on Queensbridge Street at Southbank.
"It is not intended that any gaming operations will be conducted in the new building," Crown said in a statement on Friday.
A final joint venture agreement still needs to be finalised by the two companies, while construction contracts, planning and government approvals also need to be confirmed.
Mr Packer said occupancy at Crown's existing hotels is consistently over 90 per cent, demonstrating the urgent need for more hotel capacity.
"This project will create hundreds of additional hospitality and tourism jobs and training opportunities and it demonstrates Crown's confidence in Melbourne as a world-class tourism destination," he said.
Construction of the hotel would create about 2,000 jobs, Schiavello said.