Rehabilitation services currently delivered at Headley Court, near Leatherhead in Surrey, are being moved to a new purpose-built location at Stanford Hall, near Loughborough.
Construction at Stanford Hall will start next year.
The centre will be part funded by donors led by the Duke of Westminster, who bought the Stanford Hall in 2011.
The new facility will be four times the size of Headley Court and will improve and advance the treatments already available to injured members of the armed forces, the Ministry of Defence said.
It is planned that the new Defence & National Rehabilitation Centre will open at the end of 2017.
Defence secretary Philip Hammond said: “Today’s announcement will establish a long-term, state-of-the-art rehabilitation facility for our injured personnel, building on the great work of Headley Court, to ensure our armed forces continue to receive the very best care.”
The Surgeon General, Air Marshal Paul Evans, added: “Thanks to the Duke of Westminster’s initiative and his generosity, and that of other benefactors, a new state-of-the-art medical rehabilitation centre will provide our injured troops with a remarkable place to recover and begin rebuilding their lives.
“The new centre will build on the legacy of the Defence Medical Rehabilitation Centre at Headley Court and the significant support it has received from many forces charities, including Help for Heroes, the Royal British Legion and SSAFA.
“It will also provide the bedrock of the capability development for musculoskeletal injuries for the next 20 or so years.”