Distinction Hotels group general manager Duncan Fletcher confirmed to the Otago Daily Times building consents had been lodged for the first stage of the redevelopment.
Work to replace the ageing roof could begin as soon as next month.
Mr Fletcher said the second stage of the redevelopment would involve transforming the derelict building into a "4-5-star to 5-star hotel".
"We want it to be the best in town."
The New Zealand hotel chain, which operates hotels in Te Anau, Queenstown, Rotorua and Fox Glacier, bought the 19,000sq m, nine-storey, property in May.
Constructed of reinforced concrete, the building was opened in April 1937 and closed as the chief post office in 1994.
It comes with existing resource consent following a previous attempt to redevelop the building.
The building was to be redeveloped as a Hilton hotel by property developer Dan McEwan, who bought it in 2006 for $7 million, but it was later sold in a mortgagee sale.
Mr Fletcher said the finished hotel was likely to have 170 bedrooms, including corner suites overlooking Otago Harbour, conference facilities, a gym and restaurants all owned and operated by Distinction Hotels.
Owned by Invercargill businessman Geoffrey Thomson, the hotel chain aimed to open the Distinction Dunedin in early 2012.
Mr Fletcher said the company saw potential in Dunedin as a destination and believed an increase in hotel capacity would help stimulate further growth in the city.
The completion of the Forsyth Barr Stadium next year was expected to attract more conferences to the city, and the company was keen to capitalise on increased interest in Dunedin as a tourism destination.
Mr Fletcher praised the Dunedin City Council as proactive and pro-business, as "it helps when they want to work with you".
He declined to say how much the project was costing the company, and it was too early to say how many full-time equivalent jobs it would provide for the city during the redevelopment phase and once it opened.
Tourism Dunedin chief executive Hamish Saxton said confirmation the hotel chain would begin work on the often admired building was welcome news.
Citing the aviation industry as an example, he said competition and increased capacity was "great for the market".
Announcements of events at the Forsyth Barr Stadium were generating increased interest in Dunedin both in New Zealand and overseas, not only among independent tourists but also corporate clients.
The Scenic Hotel Group is adding an additional floor to its Hotel Dunedin City in time for the Rugby World Cup.
Brief history
• 1994: Closes as post office.
• 2006: Bought by property developer Dan McEwan.
• May 2010: Bought by Distinction Hotels group.
• Early 2012: "Distinction Dunedin" expected to open.
