University College Birmingham said the former hotel and Marco Pierre White restaurant at The Cube would be transformed into a 52-bedroom hotel and restaurant, giving students hands-on experience in a live commercial setting while welcoming paying customers.
UCB commercial director David Cumberlidge called it an "exciting" venture.
"It's great for the city, great for University College Birmingham, and we're looking forward to trying to get it open as quick as possible so everyone can enjoy it."
The news comes a month after the venue announced its closure "with immediate effect".
The redevelopment is the first phase of a wider programme that will also see a new restaurant open in Harborne, a cafe, restaurant and bar at the university's Summer Row campus, and a refurbishment of the existing Restaurant at Birmingham College of Food.
Cumberlidge added: "We've wanted a hotel for a long time at University College Birmingham, so it came at the right time… It will be fabulous for our students to learn in.
"I think it is the right time to invest, it's important that we do invest in Birmingham and invest in our students' futures."

