Minister for Health and Medical Education Chaudhary Lal Singh said the location has been decided and the project needs a final go ahead from the Union ministry.
Singh made the announcement while inspecting the picturesque site, measuring around 200 hectares at Awantipora along the Jammu-Srinagar National Highway, an official spokesman said.
Singh said the government has completed all the formalities in both the regions -- Kashmir and Jammu -- as far as the setting up of AIIMS was concerned.
He also said that Union Health Minister J P Nadda is likely to visit the sites in the state.
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The Minister discussed the project threadbare with health and revenue officers and told that the Union government has approved Rs 1,900 crore for up-gradation of healthcare facilities and construction of new hospitals across the state and Rs 3,000 crore for construction of two AIIMS in Kashmir and Jammu.
The minister said that in Jammu region, two sites were proposed from two different places. In Kashmir, only one site, Awantipora was suggested to the Centre.
"Setting up of AIIMS in both the regions would be a major development in the healthcare system of the state," he said.
"This will give new fillip to overall healthcare," he added.