The multi-purpose service (MPS) hospital was opened by the NSW parliamentary secretary for regional health, Melinda Pavey, who said she was proud to open a "thoroughly modern facility that worked from the MPS model".

- GALLERY: Inside Gundagai MPS

Ms Pavey said it was a model that was smart and efficient, ensuring the challenges of patient care in regional areas are met.

"It's a system that works with doctor shortages to ensure patients are treated in a timely manner," Ms Pavey said.

The new hospital comprises 12 inpatient beds including respite beds and a palliative care suite; 18 residential high-care beds, 19 residential low-care beds and a 24-hour emergency service.

The hospital doesn't offer maternity services.

Gundagai doctor Paul Mara said it was the acute and aged care services within the hospital that were welcomed by the town's medical fraternity.

"It will allow us to better co-ordinate between areas of the hospital," Dr Mara said.

"The aged care services have also been expanded."

Gundagai mayor Abb McAlister said the town was lucky to receive the new hospital, and have long-term doctors choosing to work at it.

"We're thankful to everyone involved in making this a reality."