The decision was announced in a pastoral letter to the city's Catholic community on Sunday.
The original Cathedral of the Blessed Sacrament on Barbadoes Street was opened in 1905, but demolished in 2020 after suffering irreparable damage in the 2011 earthquakes.
Bishop Michael Gielen said by building on the same site, the diocese was continuing 160 years of Catholic worship there.
"This will be the first new Catholic cathedral built from scratch in New Zealand for more than 120 years, so it will be a complex undertaking," he said.
"As people in Christchurch know, it takes several years to erect high-quality buildings. Our new cathedral will take time, but the wait will be worth it."
Gielen would initiate a process to select a name for the new cathedral in the next few weeks.
Diocesan general manager Simon Thompson said three possible locations were considered for the new cathedral - Barbadoes Street, Armagh Street, or expanding St Mary's Pro-Cathedral on Manchester Street.
Almost 85 per cent of 1604 respondents to a community survey about the proposal supported the Barbadoes Street option.
Gielen said that site also made the most financial sense.
"This decision supports our goal to be a financially stable diocese.
The site would include the cathedral, a cultural and community centre, offices, a presbytery (clergy house) and parking, Thompson said.
Master planning would begin this year and would inform what part of the site the cathedral would occupy.
The diocese would soon sell off land it owned in the central city in order to fund the cathedral build, he said.
No dollar figure has been given for the project, but it can be expected to cost tens of millions of dollars.
