The first phase of the expansion is an upgrade of the hospital’s internal infrastructure including a new roadway, roundabouts and improvements to its existing helipad to provide better transport links into the hospital.
By 2031 an extra 70,000 new homes will be built in the city and population levels are expected to reach 348,260*.
Jane Hamilton (pictured), chief operating officer for Milton Keynes Partnership, said: "As our city’s population grows, this will of course place a stress on existing public services, which is why MKP is working hard to assist important infrastructure developments with financial support.
"We have an important job to help build confidence in the growth plans for Milton Keynes in everyone who lives and works here.
"We’re delighted to provide the funding to enable the necessary internal infrastructure upgrades needed to service an expanding hospital allowing its NHS budgets to concentrate on patient care."
Bob Heavisides, Director of Facilities at MKGH, said it was critical for the hospital to plan for the future, "We can now provide an improved road infrastructure, which will benefit our hospital patients and staff for the next 20 years.
"The upgraded transport links in and out of the hospital will cater for the increasing number of patients, improving efficiency and providing the foundation for new buildings and facilities to be built in the future. The external funding from MKP means that NHS grants can be spent purely on enhanced medical facilities for our patients."
The total upgrade budget will be £2.5 million with £1.9 million coming from MKP via the Milton Keynes Infrastructure Tariff and MKGH contributing the remainder over a five-year period.
As part of its directive to help deliver sustainable growth to Milton Keynes, MKP will continue to work closely with the hospital management team providing support for its continuing expansion of healthcare facilities.
