The £1bn project will feature five restaurants, 137 rooms, six retail units, a spa and a 1,000 capacity ballroom when it opens in 2023.
Qatari developers Qatari Diar are working with the Grosvenor Estate to open up the site, previously one of the most heavily guarded buildings in London, to complement the “expansive green space” of Grosvenor Square.
“The opportunity to transform such an iconic address is something that only happens once in a lifetime and we are extremely proud to be responsible for it,” says Abdullah Al Attiyah, CEO at Qatarai Diar.
Rosewood’s current London hotel is home to Holborn Dining Room, the Mirror Room and chef Calum Franklin’s specialist Pie Room.
The group is also set to launch a new lifestyle hotel brand, Khos, with communal dining later this year.
The US embassy relocated to Nine Elms in south London earlier this year, reportedly because the old site was too small for modern security measures.
The move has been criticised by President Trump, who said the "bad deal" was the basis for initially calling off his visit to the UK.
Trump tweeted in January: "Reason I canceled my trip to London is that I am not a big fan of the Obama Administration having sold perhaps the best located and finest embassy in London for “peanuts,” only to build a new one in an off location for 1.2 billion dollars. Bad deal. Wanted me to cut ribbon-NO!"