The ACT government will take control of Clare Holland House next week after it reached an agreement with Calvary over the hospice.
The future of the hospice had been in limbo after the government made the decision last month to forcibly acquire Calvary's Bruce public hospital.
Calvary has said it "reluctantly" made the decision to relinquish the hospice.
"Calvary and the ACT government have mutually agreed the future of Clare Holland House and access to public palliative care services in the territory is best supported by remaining directly connected with the public hospital to ensure continuity of care for patients needing public palliative care services," Calvary national chief executive Martin Bowles said.
"It is with a heavy heart that we have come to this decision, but in our view Clare Holland House is not a separate service and patient care is our priority."
Health Minister Rachel Stephen-Smith said the decision would ensure continuity of care for patients needing public palliative health services.
"We have heard very clearly from staff that they believe palliative care services - hospice and community-based - should stay together as a specialised, integrated palliative care service," she said.
Canberra Health Services will take over the running of the service and the Bruce public hospital from July 3. The hospital will become known as the North Canberra Hospital.
The government announced it would compulsorily acquire the Bruce hospital in early May, after negotiations over the future of the hospital broke down.
There are plans to build a new $1 billion public hospital on the site.
Calvary pursued legal action against the ACT government over the compulsory acquisition in the Supreme Court but this was unsuccessful.
The future of the hospice was unclear in the compulsory acquisition as both the government and Calvary had disagreed on contracts for the site.
Calvary had said it operated Clare Holland House as a service of the Bruce Hospital but Ms Stephen-Smith said the government had previously sought to establish a separate contract with Calvary over the operation of the hospice.
The ACT government already owns the building and land at Clare Holland House and pays for maintenance. The government funds all services at Calvary Public Hospital Bruce but Calvary has ownership over the building and land.
The Australian Nursing and Midwifery Federation had raised concerns about Clare Holland House after the government announced the acquisition.
The government had already planned to takeover community-based palliative care services, which are run by Clare Holland House and the union was concerned about any separation of this.
Ms Stephen-Smith said staff at Clare Holland House would remain in their roles following the transfer.
"I know this has been a difficult and anxious time for team members at Clare Holland House, as well as their patients and the community. Canberra Health Services will be working hard in the coming days to support staff, patients and carers by providing information and answering their questions," she said.
"Our commitment to Clare Holland House team members is that they will be able to continue doing the same job, in the same team, with the same manager on the same pay and conditions."
Clare Holland House is the only publicly funded hospice in the territory. The ACT government is expected to pass voluntary assisted dying laws late this year or early next year.
Calvary is a Catholic-run organisation and would not allow voluntary assisted dying at the hospice.
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