The emergency department of Melbourne's Royal Children's Hospital will be expanded to meet a rise in demand.

An extra 20 emergency clinical treatment spaces will be created through a $50 million state government investment, boosting the department's capacity by a third.

The works will begin in July, with the expanded emergency department to open in mid-2023.

Work on a new 30-bed inpatient unit at the hospital, which will support an additional 2730 children each year, is already underway.

"A bigger and better Royal Children's Hospital will ensure Victorian kids continue to receive the world-class healthcare they deserve when they get sick or an emergency strikes," Health Minister Martin Foley said in a statement on Sunday.

The Royal Children's has been periodically diverting patients from its emergency department in 2022 because of extremely high demand.

More than 300 children present to the department each day.