The site is the first to be sold by English Partnerships from its portfolio of 96 NHS properties and marks the initial step in a programme that aims to deliver around 14,000 homes across the nation, of which half will be affordable.
The 34ha site, one of the largest earmarked for housing in Basingstoke and Deane Borough Council's local plan, is awaiting reserved matters approval.
Taylor Woodrow is expected to start work next May.
Council cabinet member for housing Laura James said: "We have eagerly awaited progress on this site, which will see much-needed affordable homes built for the people in Basingstoke and Deane."
A further 4ha are earmarked for 130 homes as part of the Design for Manufacture competition run by English Partnerships on behalf of the ODPM. Forty per cent of homes across both sites will be affordable or designated for first-time buyers.
The area encompasses former hospital buildings including a clock tower, water tower, main hall, six fan buildings and four garden pavilions. These will be converted into homes, community facilities and local shops. English Partnerships is working alongside English Heritage to preserve all buildings or landscapes of historic significance.
The whole portfolio of sites covers 1,600ha and could generate up to £1 billion in private sector investment over the next five years. The programme will create 80,000m2 of employment space and could reclaim 500ha of brownfield land.