Batemans Bay is likely to have a Headspace service by the middle of 2020.
The youth mental health facility is expected to cost $1.53 million.
Federal Health Minister Greg Hunt and Gilmore MP Ann Sudmalis announced the plan on Tuesday, April 9, saying early intervention was crucial.
They said one-in-four people aged 16 to 24 experienced some form of mental illness every year and three-quarters of all mental illness manifested in people under the age of 25.
Health campaigner Dr Michael Holland welcomed the news.
"Health policy is based on the need of our community and the effective provision of services," Dr Holland said.
"The commitment to youth mental health services locally will not only save lives but will create a generational change for our residents.
"This is another step to comprehensive mental health care from pregnancy to old age."
The federal government said Headspace and south-east Primary Health Network had identified Batemans Bay as an area of need.
"The new headspace centre will provide vital services and deliver innovative support for young Australians in Gilmore," Mr Hunt said.
"I want young people to know they are not alone on their journey."
Mrs Sudmalis said she wanted to ensure "young Australians can get information, advice, counselling or treatment, when and where they need it".
"These guaranteed new frontline services will help deliver that support," she said.
"This announcement is the culmination of this advocacy to meet a gap in community service and I am thrilled because this will address an unmet need in the area," Mrs Sudmalis said.
Headspace says it offers early intervention services across four key areas-mental health, related physical health, social and vocational support, and alcohol and other drug use.
"Services provide tailored and holistic mental health support, working closely with young people at a crucial time in their lives to help get them back on track and strengthen their ability to manage their mental health in the future," a spokesperson said.
This investment is part of the Morrison Government's $461 million Youth and Indigenous Mental Health and Suicide Prevention Plan - the largest investment of its kind in the country's history. The new service in Batemans Bay is one of 30 new sites announced as part of the expansion of the headspace network from 115 to 145 sites nationally. It is expected that it will open by the middle of next year.