Developers have applied for planning permission to transform the derelict St John's Hospital, in Bracebridge Heath into new housing.
The hospital was first opened as the Lincolnshire County Lunatic Asylum in 1852 and has stood empty since it was closed in 1989.
Property development firm Mabec intends to turn the grade-two listed building into 64 houses and 42 apartments.
Plans also include 68 new houses and 30 'senior living' properties to be built in the hospital's ten-acre grounds, bringing the total number of new homes to 204.
Approval is also being sought for new highway access, on site highways, parking and landscaping.
Demolition is planned for non-original additions to the listed building including a lift shaft, dumb waiter, water tower, bus stops, ramps, kitchen block and derelict outbuildings and walls.
Small alterations are included to the exterior of the listed building to create doorways and access steps.
Internally, partitioning, walls and ceiling areas will be stripped to facilitate the residential development.
Mark Elliott, director of Mabec, said that a housing development was the best-possible solution for the site.
He said: "We bought the site in December after the previous development company that owned it went into administration.
"Since then, we've done three lots of public consultations on the site with residents and the council and it's all been very positive.
"We have a beautiful listed building and we want to work with what we've got.
"The idea is to change as little as possible unless it is clearly an eyesore."