The 141-bedroomed property is set to open at the city's Stadium Park site in spring 2016 and will boast a feature bar and destination restaurant, meeting spaces and private dining areas.
It is hoped it will create work for more than 100 full- and part-time staff, bringing a much-needed boost to Sunderland’s economy.
Harry Trueman, deputy leader of Sunderland City Council, said: "It’s great to see this project get started, it is a fantastic development for Sunderland.
"The city welcomes hundreds of thousands of visitors every year, to a wide range of major events, and new high-quality hotel provision like this will hopefully encourage more of those visitors to stay in Sunderland, providing an additional boost to the local economy," he added.
The hotel is being built by North East-based Tolent Construction Limited. Its chairman John Wood said: "We are delighted to have the opportunity to work on this very prestigious development, which will add to the ever increasing profile of Sunderland and the region.