Around 200 asylum-seekers are set to lose their home at Hatch Hall in Dublin 2.
Owner Red Carnation Group has announced plans to convert the building, currently used as a direct provision centre, into a five-star hotel.
A spokesperson for the Department of Justice said Hatch Hall is contracted to serve its present purpose through the Reception and Integration Agency (RIA) until next January.
"The department has not been formally notified of any intention by the contractor to terminate the contract earlier than this date," the spokes- person said.
"In the event an attempt is made to terminate the contract before its expiry date, the department will take all appropriate steps.
"These include seeking to reaccommodate those still in the protection process within RIA's accommodation portfolio and by providing residents with status or permission to remain with assistance to move on from accommodation centres."
Hatch Hall is contracted to hold up to 220 asylum-seekers, an RIA report says.
On its conversion, a spokesperson for Red Carnation Group, which owns Ashford Castle, said: "We look forward to opening our third property in the country and continue supporting Irish hospitality."
The Irish Refugee Council said: "If and when this happ-ens, Hatch Hall will be the third direct provision centre - Watergate Hall and Gardiner Street the others - to recently close in Dublin.
"It is crucial that people living there, many who have strong connections to Dublin - school, study, medical - can remain here."
The Department of Justice said the RIA has processes in place to assist those with status or permission to remain if they have chosen not to leave direct provision accommodation.
Founded in 1913 as a Jesuit student hall, Hatch Hall was previously used to house UCD students, including former Taoiseach Brian Cowen and Ryanair boss Michael O'Leary.
It was bought in 2004 for €16m by developer Gerry Barrett, who said he intended to develop it into a hotel, but it has been a direct provision centre for more than a decade.
Last week, plans for an accommodation centre for refugees in Rooskey on the Roscommon-Leitrim border were scrapped.
The Department of Justice said the decision not to create an asylum centre at the Shannon Key West Hotel followed difficulties with the lease.
"The department regrets that it is not in a position to proceed with plans" a spokesperson said.
"The decision was taken following legal advice sought from the Chief State Solicitor's Office, which found difficulties with the lease agreement between the owners of the hotel and the operator renting it.
"That made proceeding with the proposed centre unviable."
The spokesperson added that the department is "not party to these lease arrangements" and that the matters were outside its control.
Justice Minister Charlie Flan-agan denied the Government had given in to "racist arsonists" by making this decision.
The proposed centre in Rooskey has been the target of two arson attacks in recent months.