Quest's £10 million in the site will create 200 jobs in the area during construction and further 25 part-time and full-time positions once it opens its doors next summer.
Quest Liverpool City Centre is located on Church Street, along one of the city's busiest shopping streets and adjacent to the landmark Liverpool ONE complex.
Quest will be working alongside the developer, Vabeld and Graham Construction to convert the second, third and fourth floors of the 1980s commercial office building. It will also construct additional fifth and sixth floors, creating 100 serviced apartments, reception, conference room, gym and back-of-house facilities.
Liverpool councillor Gary Millar and Quest director of UK development Andrew Weisz were on site to mark the start of construction work.
Weisz said: "It is great to be creating opportunities at the heart of such a vibrant and dynamic city - now and in the future. We've got ambitious, long-term plans here in the UK and Liverpool is an integral part of our plans."
Cllr Millar said: "To welcome global commitment to Liverpool during International Business Festival, highlights that the city region is open for investment and trade. It's no longer just about Europe - we're seeing international interest from our friends in the Commonwealth and we're delighted that a tried and tested company like Quest, Australasia's largest apartment hotel operator, has chosen Liverpool as the site for their first UK development."