Dunedin's council is launching a public campaign to have the government commit to keeping the hospital in the inner city.
A shortlist of possible sites for the $300 million project to replace Dunedin's failing hospital buildings includes moving it to a greenfields site outside the CBD or a satellite campus.
The Dunedin City Council has already passed resolutions and written to the Prime Minister insisting the hospital must stay in the central city, but it has now confirmed it will launch the campaign later this week to enlist public support.
Councillor David Benson-Pope said the idea the new hospital could be built 15 minutes away on the site of the mental health hospital at Wakari, or on a totally new site outside the city was crazy.
He said any option outside the CBD would be catastrophic for Dunedin's inner city.
"You know we've got the regional council putting a bus hub downtown a block away from the hospital, we're about to spend millions redoing the water pipes, electricity and paving in the streets."
More than 3000 people work at Dunedin Hospital.
Mr Benson-Pope said a lot of retail businesses would fail without the foot traffic from those staff, but also patients and visitors.
Frustration in the city is building, amid a perception that decisions about the new hospital are being made behind closed doors without public input.
Councillor Aaron Hawkins said the rebuild was now Dunedin's number one issue.
Mr Hawkins said it was disappointing that the city had to launch another public campaign to ensure the ongoing public services in Dunedin, but he was not afraid to fight.
He said it was a repeat of the council's successful campaign 18 months ago to get the government to earthquake-strengthen Dunedin's historic courthouse building.
"If we have to fight for it we will. We've done it before and won, and we'll do it this time and win again," said Mr Hawkins.
Building on the existing site while maintaining a fully working hospital would be difficult and might cost a lot more than moving elsewhere.
But the chief executive of the Otago Chamber of Commerce, Dougal McGowan, said it was right behind the council because of the effect on retailers, business and Otago University.
The university medical school is right next to the hospital.
The university's pro-vice chancellor of health sciences, Peter Crampton, said he respected the government's business planning process.
But Professor Crampton said moving the hospital much would be a terrible mistake, ending the dream of a world-class health precinct.
He said the university and hospital had been working together to blur the boundaries between health training, science and health services, and breaking that up would have a profoundly negative effect.
"It goes to the very heart of what we are trying to do."
The rebuild is led by a group set up by the government called the Southern Partnership Group.
Its chairperson, Andrew Blair, said there was no need to protest because the group had heard the community's message loud and clear.
"We're obliged to go through a process, but we're not going to do something that is stupid."
Mr Blair said the group was looking hard at reusing the existing site, nearby sites and others around the city and that should give the public comfort.
"This is not a silly campaign to move the hospital off to Mosgiel," Mr Blair said.
He said the group was on track to give the Health and Finance ministers an indicative business case with a short list of rebuild options by late July.