The Cabinet has endorsed a recommendation by the Health Service Executive to locate the new national children's hospital in Dublin's Mater Hospital.
It has also asked the HSE to explore any philanthropic proposals in relation to the new National Tertiary Paediatric Hospital project.
Minister for Health Mary Harney said she was satisfied that a rigorous and robust examination of the key issues had been carried out by the HSE in making its recommendation.
Ms Harney said there had been extensive consultation with the three hospitals, international experts on matters of access, governance and clinical values.
"The decision has been taken with the best interests of children in mind. Now is the time to move on to develop this project." Ms Harney added.
"The Task Group engaged in extensive consultations with the three existing paediatric hospitals, the three maternity hospitals, and external experts in arriving at its recommendation, and gave in-depth consideration to the key issues of access, governance, clinical values and site suitability."
The minister said the new hospital will be pluralist and multi-denominational in character.
Two Dublin hospitals, Our Lady's in Crumlin and St James' have refused to support the proposal to locate the facility at the Mater Hospital.
Senior consultants described the selection process as flawed and called for an international peer review.
Fine Gael's Seanad leader, Brian Hayes today called for a postponement on any decision and a full debate on the issue next week if possible.
"The Government would be well advised to hold off on making a decision at this stage on the issue for at least a month or two.
"There is considerable doubt about the suitability of the Mater site as the best one for a new national children's hospital."
Mr Hayes said it must be remembered that is not just a facility for Dublin, but for the whole country as well.
Independent Senator David Norris said an international peer review would only take three to four weeks to deliver a report. "It may well be that the Mater Hospital site will still be chosen. It is a very good hospital but while it is a fine site, it may not be capable of the kind of expansion necessary in future," he noted.
Government Senator Cyprian Brady said the project has already been held up for more than 18 months and it was time for a decision. "The expert study took account of not only European but also worldwide best practice. The report has been presented to and accepted by the HSE and we should now move on."
Seanad leader Mary O'Rourke said it would be very wrong to defer a decision as it would send out the wrong signal. "We are all rightly aware of the needs of children and this hospital is to serve the whole country.
"Groups have been set up and have discussed it and agreed the location. There have been endless discussions on it. To set up another group to decide what to do would be time consuming, would give rise to criticism and I am not sure if it would arrive at a different conclusion."