Part of the $290 million Revitalising Central Dandenong initiative, the Thomas Street building will be one of the first developments built on land acquired by VicUrban.

The $55 million building will house the departments of human services, justice, planning and community development, and education and early childhood development in 14,100 square metres of office space.

Grocon's general manager for developments Carolyn Viney said: "The building is consistent with Grocon's sustainability platform and is expected to become an instant landmark that sets a high standard for all new buildings that follow in the Revitalising Central Dandenong initiative."

VicUrban chief executive officer Pru Sanderson said the appointment of Grocon showed the opportunities open to the private sector as part of RCD.

"The fact that Grocon has seen fit to invest in Dandenong is evidence that the work undertaken by VicUrban and [Greater Dandenong] Council - in consultation with the local community - is creating viable commercial development opportunities, the likes of which have not been seen here for many years."

The State Government has committed funding of up to $19 million to the development, with works expected to commence early next year.

Dandenong MP John Pandazopoulos said Grocon had built iconic buildings all over the world.

"This shows there are great opportunities for Dandenong and this will help put the city on the map to anyone who thinks they can make a go of it."

Work has begun in preparation for the demolition of The Grand International, part of which will make way for the new street that connects the Dandenong railway station with the town centre and other shops at the corner of Walker and Thomas streets, the site of the new building.