The appeal launch in November will coincide with the hospice's 15th anniversary and the money will be used to build a two-storey extension that will replace dilapidated and cramped portable buildings.
The new extension will include a bigger daycare room, individual treatment and counselling rooms, an education and conference centre and new offices - all aimed to help maintain the hospice's excellent standards of care.
The £1.6 million will allow for future structural and staff upgrades at the hospice, including the ability to incorporate another four patient bedrooms into the final design.
The extension is part of a two-phase project that has already seen the completion of four new patient bedrooms and a nurses station and ward office - funded by the National Lottery.
General manager David Stewart said the initial plans had been drawn up following consultation with staff and careful consideration had been given to the needs of a growing community.
He said: "We currently provide vital services to the Five Towns. If we are to meet the future care needs of the community then it's important that our facilities are extended now."