The Minister for Health and Social Services, Lesley Griffiths has announced the grant, which will pay for a 21 station Renal Dialysis Unit within the hospital grounds.
More patients will have the opportunity to undergo treatment locally, reducing the need for travel.
The Renal Dialysis Unit currently operates in a temporary building housing only six stations. Although it has been designed to facilitate haemodialysis, it was only intended for use as an interim facility.
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The new unit will deliver vital renal services for the patients of West Wales, providing environmental and patient focussed designs required of modern renal unit.
Building will start on site in August 2012 and could be complete by early 2014. This is part of a programme of development in renal dialysis care and the Welsh Government will continue to modernise facilities and increase capacity for dialysis in a number of suitable sites across Wales.
Health Minister Lesley Griffiths said: "I am delighted to announce this funding. The number of patients relying on dialysis continues to increase and this unit will be ideally placed to accommodate the growth in demand.
"At a time of such perceived uncertainty, this demonstrates the Welsh Government is committed to improving services in Wales to make them safe and sustainable for now and into the future."
(CD/GK)
