The project, in partnership with Irish Water and Limerick County Council, will replace 1.9km of water mains and install 950m of new rising mains.
The works will take place along the R513 Main Street and R516 Knockainey Road.
It is part of Irish Water's Leakage Reduction Programme.
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Replacing the water mains and service connections will reduce the instances of bursts and water outages and ensure a reliable supply of water to customers and local businesses in the area.
Alan Morrissey, Irish Water's Networks Programme Regional Lead, commented: "This project is essential in providing a safe, secure and reliable water supply for Hospital now and into the future. We would like to thank the people and businesses in Hospital for their patience and support while this work is being carried out and assure them that we will work with our contractors to keep any disruption or inconvenience to a minimum."
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