Brighton General Hospital will not now be redeveloped for housing but will continue to offer health services.
NHS chiefs had planned to gradually transfer services away from the General and sell the land for housing.
In a strategy report to the South Downs Health NHS Trust board, the hospital had been earmarked as the new focus for development.
However, the board is reviewing its five-year strategy and is expected to agree to keep facilities at Brighton General.
The trust, which provides community and mental health services, says it is dealing with increasing demand for accommodation for local NHS services.
Director of facilities Bob Ellarby said: "We want to get across that we are staying at Brighton General.
"We can't say that no part of the site will ever be used for housing in the future but our focus is to keep on providing health services there."
The buildings at the site in Elm Grove have been dismissed as no longer suitable for modern health care.
But the trust says the success of recent major refurbishments shows what can be done.
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