As part of the state government's COVID-19 recovery package, the South West Health Campus will receive $38 million this financial year.
The funding is part of a long term commitment of $200 million to go towards the redevelopment of the hospital.
However, WA health minister Roger Cook said because of COVID-19 some of the works needed to be brought forward.
"We know this is an expanding area of WA with many people choosing to live in this great part of the state," he said.
He said the funding would go towards the most 'urgent' elements of the redevelopment.
This includes and extra 215 parking bays, additional operating theatre, moving hospital at home and telehealth services off campus, recogfiguration of the emergency department, establishment of an acute assessment unit and a mental health observation area in ED.
Mr Cook said moving the hospital at home and telehealth service away from the campus would help ease the congestion at the hospital.
"Bunbury Hospital is country WA's busiest hospital servicing more than 170,000 South-West residents as well as seasonal tourists," he said.
"It's important they have access to a facility that meets their growing needs and that's why we're dedicated to this project."
Expansion of the car park is set to get underway in summer and Mr Cook said it would meet the current needs.
The money is part of the government's recovery package because it aims to employ local contractors for the projects which in turn boosts jobs and the economy.
Mr Cook said the funding would also see the first time for a push towards a research and training centre in a regional area.
He said the centre would help attract more younger doctors as well as senior consultants to be based out of the campus.
The mental health observation area is part of an initiative being rolled out across the state to help patients who need to de-escalate their mental health episode.
"You are all familiar with an ED setting, it is bright, loud, sometimes distressing so people coming to the hospital who need to have their mental health addressed, need a calmer, quieter, dimly lit environment so they can de-escalate from their episode and receive approprate care," he said.
Bunbury MLA Don Punch welcomed the funding and said the upgrade was a key election commitment.
"Bunbury Hospital acts as a hub for health services across the South West and as the population grows, it's important that infrastructure and service capacity does too," he said.