The Department of Home Affairs will apply for planning permission to convert Grianagh Court into a new purpose built facility.
Under the plans it would become a rehabilitation and resettlement centre.
As it stands Grianagh Court serves as the in-patient admission unit for the mental health service.
The building will become available in 2016-17, with the Department of Health progressing plans to construct a new adult acute mental health facility.
The centre would enable the Department to fulfil its statutory responsibility to provide services in relation to probation, bail and after care of offenders.
The new facility would replace the existing David Gray House, which is owned and run by the Salvation Army.
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