Former premier Barry O'Farrell visited the site with Member for Monaro John Barilaro last October, and committed $7,000 to remove asbestos from the site, work which has now been completed.

Impressed by the historic significance of the property, he gave an undertaking to find the necessary funding toward an upgrade. And on Monday Mr Barilaro announced the funding had been confirmed.

"I'm pleased to announce the NSW Government will provide a grant for $150,000 towards the restoration project," he said. "The first payment of $75,000 has already been made to Queanbeyan City Council; the second is scheduled for July."

Rusten House was built in 1861 and was named after the hospital's first matron, Mrs Mary Rusten, who occupied the position for 28 years.

The old stonework building is currently being transferred from state ownership to Queanbeyan City Council, who will open it to community use.

Queanbeyan mayor Tim Overall said on Monday that Council had allocated a further $50,000 to the restoration, and would soon seek ideas from the community about how best to use the site.

He said the combined $200,000 would get the building back to a "useable" standard, but that a full restoration of the grounds and building could cost a further $300,000.

"This is going to be our pride and joy into the future, I have no doubt about it," Cr Overall said.

"I look forward to the day - with the community - of being able to access this wonderful building and being proud of its heritage and part of our history."

Mr Barilaro also welcomed the return of the building to the Queanbeyan community.

"Rusten House is an integral part of Queanbeyan's history and it's appropriate the building is being restored for the community to enjoy," he said.

"I'm pleased the NSW Government and Council are working well to upgrade this heritage-listed property for the people of Queanbeyan."