Robertson Yorkshire & East Midlands has been appointed to carry out the first phase of work on the development and work is expected to begin this month.
The new £9.8m home will replace Ada Belfield Home for Older People on the former Thornton's factory site. Located on Derwent Street, the facility will include a new library and a pedestrian link to town centre shops.
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The facade of the Castle blouse and hosiery factory, which later became Thornton's and the Empire Music Hall, are both being retained to form the new library.
All current residents of Ada Belfield will be offered a home in the new development, which is scheduled to be complete by summer 2019.
Cllr Jean Wharmby said: "I am delighted that work will now start on this development.
"The quality of care offered by the dedicated team at Ada Belfield was never in doubt but the building itself does not meet standards provided in other council-run homes and care centres and the cost for maintenance and refurbishment would be around £850,000.
"This new state-of-the-art building will be a great addition to the town and, by retaining some parts of the old factory frontage, it means it will also retain some of the town's heritage."
(LM)
