Work is due to start on the site at Tremadog next June

It was announced over the summer that financial issues for the 30-bed hospital had not been resolved.

Work had been expected to start in July this year.

Now the �13.5m project has finally been given the green light and building will start on the site at Tremadog in June 2005.

The Welsh Assembly Government is paying for the new building with the running costs being met by Gwynedd Local Health Board (LHB).

Keith Thomson, chief executive of the North West Wales NHS Trust said: "I am delighted that this delay has been resolved, and that we can once again move ahead with the scheme.

"Preparation and enabling work on the site will now begin in March, with the civil and construction work beginning in June of next year."

The sticking point involved the local health board paying interest on the project, with the assembly government saying the hospital's running costs included capital charges, which reflected the use made by the NHS of the property

But both sides had been confident the issue could be resolved.

Grace Lewis-Parry, chief executive of the local health board said: "The LHB is very pleased the long-awaited community hospital development can now go ahead.

"The financial difficulties involved a capital charge of �750,000, but following discussions between the trust, Gwynedd LHB and the assembly, these have now been resolved."

The trust has completed the purchase of the land, Gwynedd Council has given planning permission and the assembly government has also given the trust approval of its business case for the hospital.

It is four years since Health Minister Jane Hutt announced plans for the hospital.