President Yahya Jammeh said in 2007 he had found a remedy of boiled herbs to cure AIDS, stirring anger among Western medical experts who claimed he was giving false hope to the sick.
"With this project coming to fruition, we intend to treat 10,000 HIV/AIDS patients every six months through natural medicine," Jammeh said in his New Year's address, adding that he expected the 1,111-bed hospital to open in 2015.
The World Health Organisation and the United Nations have said Jammeh's HIV/AIDS treatment is alarming mainly because patients are required to cease their anti-retroviral drugs, making them more prone to infection.
Jammeh said in October that 68 HIV/AIDS patients undergoing his herbal remedy had been cured and discharged, the seventh batch since the treatments began five years ago.
Other African leaders have drawn criticism for extolling the power of natural remedies to combat AIDS.
The administration of former South African President Thabo Mbeki was ridiculed for denying there was a link between HIV and AIDS while prescribing meaningless treatments such as beet root instead of internationally proven medicines.
The HIV rate in Gambia is relatively low compared to other African states, with 2 percent of the country's roughly 1.8 million people infected, according to the United Nations.
Jammeh came to power in Gambia, a sliver of land on Africa's west coast that is popular with sun-seeking European tourists, in a bloodless military coup in 1994.
He is accused by activists of human rights abuses during his rule, and most recently drew international criticism for executing nine death-row inmates by firing squad.
(Reporting by Pap Saine; Writing by Richard Valdmanis; Editing by Michael Roddy)