The new unit will be built at St James's Hospital

Thousands of children from across the region will be treated at the 370-bed facility at St James's Hospital.

Health bosses say the �230m development is vital to provide children across Yorkshire with access to the best possible care.

Trust Chief Executive Neil McKay hailed the announcement by Health Secretary John Reid as "fantastic news".

Campaigners have been fighting for a dedicated children's hospital in the city for 15 years.

Public consultation

Mr McKay said: "This announcement means that our vision for a children's and maternity hospital along with the improvement of other health services has passed its biggest hurdle.

"I'd like to thank everyone who has been involved in our bid. From the Trust staff who worked so hard putting it together to those, such as the MPs for Leeds and West Yorkshire, who have campaigned on our behalf and won support strong enough to be heard by the Secretary of State."

The new hospital, which is expected to open in 2012, will centralise services for children currently provided by sites across the city.

It will include one of only three children's liver units in the country, becoming the biggest centre for transplants in England.

Health bosses will now spend the next 15 months developing their plans for the unit, which will be funded by a mixture of the government's Local Improvement Finance Trust (Lift) and the Private Finance Initiative (PFI).

Members of the public would be invited to contribute to the process, Mr McKay added.