Far left, Sybil Ralphs and Matthew Ellis signing the agreement. Kniveden Hall care home in 2008.
Staffordshire Moorlands District Council and Staffordshire County Council this week reached an agreement to redevelop Kniveden Hall and adjoining Spring Hill hostel, in The Mount, Leek.
The site will bring in Extra Care specialist housing facilities and support for dementia sufferers and people needing respite care.
The news has been welcomed by families who were left devastated when the facility was shut. Sybil Ralphs, leader of SMDC, said: "This deal will secure the future of the two sites.
"When completed it will have multiple uses. This is a new concept and one which has never been done before."
Ms Ralphs said the new facility would allow the elderly and vulnerable to live independently. She added: "This shared commitment to the development of high-quality care services is right in line with the district council's priority outcomes of improved health and decent and affordable housing.
"I've worked with the county council to safeguard the long-term future of the Kniveden and Spring Hill sites.
"That's why I'm delighted to now confirm that both sites will form an integral part of this package of care".
The news comes in the same month the Post & Times revealed plans had been unveiled to turn the former British Trimmings site, in Ball Haye Road, Leek, and Compton Mill, in Compton, Leek, into accommodation for the elderly.
Kniveden was closed in 2008 as part of the Changing Lives programme. It was mothballed in November to review its future use as it was costing the taxpayer £150,000 to maintain.
Vicky Powell, who campaigned to stop the closure, welcomed the news Kniveden is set to brought back into use.
Vicky said: "This is wonderful news but I would like to be given assurances that people at Spring Hill will not be moved out while work is carried out.
"I am very happy that people have listened to us."
County councillor Matthew Ellis said: "This is an exciting opportunity to create something special for people in Staffordshire Moorlands.
"There are serious inequalities between care and support available in the north and south of Staffordshire that need to be addressed. We have the opportunity to push the boundaries of how we care for older people."
Staffordshire County Council is responsible for social care, while the district council has responsibility for planning and strategic housing.
Councillor Ellis added: "Staffordshire is already one of the national leaders in developing Extra Care accommodation for older people. It is something we are proud of, but we need to do much more and provide more flexibility."