NHS chiefs have saved a once-doomed hospital site as part of a deal to improve mental health services.
Holly House has been sold back to the county's mental health service by the primary care trust for an undisclosed fee – five years after 2gether NHS Trust sold it to NHS Gloucestershire for £4.2million.
It was due to open as a halfway house for patients leaving hospital in 2010 but was left boarded up.
Gloucester Conservative MP Richard Graham was pleased that at a time when NHS Gloucestershire is preparing to be replaced by a group of doctors which commission services, Holly House will remain an NHS asset.
"It is really good news that it will be going back to mental health which is what it was for in the first place," he said. "It will create jobs in mental health and in construction, as I understand they plan to demolish everything there.
"I am pleased that the NHS has lived up to its responsibilities to Gloucester, and is likely to bring back patients in to the county who can be nearer their families."
Community mental health recovery services at the Holly House site will help people regain skills and support independent daily living.
Chief executive of 2gether NHS Foundation Trust, Shaun Clee, said: "Our aim is to make sure that we continue to provide appropriate individual and personalised local services for our communities in the right place at the right time."
The site won't be used as a halfway house between hospital and home – known as intermediate care but instead people will most likely be placed in private nursing homes.
Councillor Andrew Gravells, Gloucestershire County Council cabinet member for health and wellbeing, said: "I have worked with the PCT for a long time to find a satisfactory solution for this site and am very pleased that this proposal breathes new life into this location. It will make a big difference to patients who currently have to go outside of Gloucestershire for their treatment."