Grange Hotels is to build a 300-bedroom hotel by St Paul's Cathedral in London.
Faraday House on Victoria Street in the heart of the City will be demolished and rebuilt to include conferencing facilities, a health club and 100 serviced apartments as well as the hotel.
Privately-owned Grange Hotels bought the property for £28m in 2004, but the company declined to comment on the budget for rebuilding and refurbishing.
The company manages all its 13 London properties and one in Bracknell, Berkshire.
The new hotel is due to be completed by 2008.