Upon completion, Noongar elder Alan 'Big Al' Harris will reside at the Porter Street village which, he said, would improve health outcomes for those living there - physically, mentally and spiritually.

"Because our culture, all of us are from different areas, so diverse cultures that we bring from different tribal groups ... that's a three pronged safety net," he said.

"Most of us have come out through the Stolen Generation. It's very hard for us to trust people and so when we can look at each other and trust each other, that's really important. This is what this offers.

"It gives you peace of mind as the older you get that, at least around you, there's going to be people who know what you went through, who had that same feeling."

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In 2022, funding for the $2.6 million project was given to Ballarat and District Aboriginal Cooperative (BADAC) under the Victorian government's $156 million Regional Jobs and Infrastructure Fund.

About 100 construction jobs and four full time jobs when the facility is in use have been created through the project.

BADAC chief executive Karen Heap said its vision for the 16-person village was a "truly culturally-safe place" for elders.

"Our elders are excited that we're actually doing this and I think they see it as a need ... this is about keeping them together and feeling like they're still a part of their community, even though they're in a supported care," Ms Heap said.

"Being able to do something a little bit different for them is important and not have that nursing home feel."

The Minister for Regional Development Harriet Shing was joined by First Nations elders as she turned the first patch off soil on the BADAC-owned site on Friday.

Construction follows an in-depth consultation period and co-design process with BADAC and the region's elders; a self-determination model which, Ms Shing said, was about autonomy and dignity for First Nations communities.

"As part of our investment into housing, we need to make sure that Aboriginal communities are given space to develop the right models that work close to town and within a reasonable distance to all the facilities they need, but also with that opportunity for communal facilities to maintain connection and opportunities together on Country," she said.

For Mr Harris, he's looking forward to moving in with his wife Leonie when the village is completed in late 2023.

"It's easy to forget to take medications, it's easy to forget to eat or not even be able to afford to eat and other people around you, close by, can make sure everything's going well," he said.

"I think for health and safety it's probably one of the biggest steps in this community for us as Aboriginal people."

Two elders involved in the consultation process who "entered the Dreaming" before construction began were also acknowledged for their work on Friday.

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