The Imperial Hotel at Mt Victoria will become a Radisson Hotel after an agreement between the boutique hotel chain and the pub's new owners.
One Pro Investment Group, which is backed by Chinese interests, bought the Imperial in 2017 for about $2.5 million.
It now has approved $8.3 million plans to restore and renovate the pub as well as a separate proposal to knock down the adjoining 1960s motel and replace it with a number of accommodation chalets set around landscaped gardens.
One Pro's plans would see close to $20 million spent on the historic pub to create a 60-bed complex.
It is due to open in 2023.
Radisson Hotel Group's director of development in Australasia, Mark Bullock, said the company and One Pro had agreed to the partnership because of "a shared vision of bringing to life a premium lifestyle hotel in a unique location".
"The launch of the upscale Imperial Hotel, a Radisson collection hotel in the Blue Mountains, holds great significance to the group... It represents an important milestone in our Asia Pacific expansion strategy," he said.
With just two existing hotels in Sydney, both in the CBD, it may seem an unusual choice for Radisson to take on the management of a development more than 120 kilometres away.
But Mr Bullock said the company believed Mt Victoria was an "ideal getaway for locals and visitors alike".
"We believe Imperial Hotel ... will be a success, boosted by One Pro Investment Group's confidence in our proven expertise and management capabilities."
Mr Bullock said the reopening of the hotel, which has been closed for more than two years, would be a major milestone in the life of one of Australia's first great tourist hotels, which opened in 1878.
"Blending history with contemporary style and intuitive hospitality, this storied hotel is also destined to become a genuine local landmark whilst complementing our existing hotels in Australia - two in Sydney and one in Melbourne.
"We look forward to boosting the Blue Mountains' visitorship when this iconic hotel opens."
Under the previous owners, the Imperial wound back its opening hours to just 10 a week in late 2016. Not long after, it closed down completely.
The new hotel would feature an all-day dining restaurant, a lobby lounge, bar, gastro-pub and a well-equipped fitness centre.
The DA emphasised the hotel's heritage, promising to retain such features as the internal staircase, front courtyard setting and upper level balconies.
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