Brisbane and Perth companies will undertake a $12 million Australian aid-funded upgrade of Nauru's hospital.
Part of the hospital burnt down in 2013.
Queensland firm Canstruct and West Australian-based Ocean to Outback Contracting will undertake the work.
About 15-20 Nauruans will be employed on the construction site.
The first phase will be a pharmacy and medical records wing due to be completed by year's end.
The next two phases - including an emergency department and operating theatre - will be finished by the end of 2016.
Nauru's Health Minister Valdon Dowiygo says patients will no longer have to travel to Fiji for potentially life-saving diagnostic imaging because the hospital is getting a CAT scan machine.
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