Construction work will begin on the Grade II listed building in 1996, after its present occupants, the Halle Orchestra, move to the nearby International Concert Hall.
The money for the pounds 30m scheme will be found in the private sector. The conversion is expected to take two years, with about 400 people employed.
The council had originally looked at a whole range of suggestions for the Free Trade Hall, located near the site of the Peterloo massacre, including a convention centre. But the final choice was for a four-star hotel.
John Lutton, the chairman of the development company, La Sande North West, said he had been in discussion with the council for more than 12 months. 'The clear response and general feeling was that a hotel was the best use for this historical building.'
Mr Lutton said the historical significance of the building would be recognised and preserved. 'We will undoubtedly be retaining the essentials.' The building, in which Disraeli, Gladstone and Churchill all spoke, has an Italian- style facade which dates back to 1856. It celebrates the triumph of Manchester's manufacturers over the landed gentry in the reform of the corn laws.
The rest of the Renaissance-influenced building suffered extensive bomb damage during the Second World War and had to be rebuilt in the early 1950s.
Mr Lutton said that the conversion would 'make a statement of what modern Manchester is all about'.Reuse content