PRC Architects and developer Try Homes have been given the go-ahead to convert the abandoned Grade II-listed buildings into 107 homes.
Built between 1884 and 1890, the main house was designed for Francis Baring - a member of the famous Baring banking family.
In the 1930s the buildings and grounds were given over to a children's hospital and new nurses' accommodation and wards, designed by Harry Goodhart-Rendel, were added shortly after.
Since closing, the former hospital - which is on Reigate and Banstead council's 'at risk' list - has been heavily vandalised and has also been ravaged by fire.
The £30 million development will restore and convert the old house into luxury apartments and there are plans to build 21 flats in a new extension block.
Emergency repairs are already underway on all the buildings and it is expected the first homes will be put on sale early next year.