CBR Properties purchased the 1966 building from the Ashburton District Council earlier this year.
The company is now developing the new property, which will be named The Library Hotel.
Construction work will commence in early 2025.
Director Chris Redmond said the building would undergo a stunning transformation.
"We are excited to be bringing this premium property to Ashburton," Redmond said.
"There is strong demand for boutique accommodation in the heart of the township for both business and leisure visitors.
“It will be a significant asset to the community, enhancing the town’s hospitality landscape and boosting the local economy,” Redmond said.
The original structure will be preserved, while ensuring it is fully upgraded to modern building standards, integrating contemporary style and amenities for guests.
It is in a good location on State Highway 1 in Mid Canterbury, an hour from Christchurch.
The site overlooks Baring Square West and East, and is close to restaurants and bars, with easy access to the town centre.
The library building was originally designed by Ashburton architects Thomas and Ward for the Ashburton Borough Council.