The proposal was approved at a meeting of the state cabinet presided over by Chief Minister Raman Singh, sources said.
The facility will function from the bio-chemistry department of the city-based Jawaharlal Nehru Allopathy Medical College.
According to sources, the institute will work towards providing assistance to patients suffering from sickle cell anaemia and also carry out research on the subject. A committee will be formed in that regard to be led by the state health minister, sources added.
The said committee which would have eight members from the government, including the chief secretary of finance, besides three prominent persons working for the cause of patients of sickle cell anaemia and two public representatives for a period of two years.
The CM had made a proposal for the said institute during his Budget speech in the state Assembly earlier this year.
The institute will also set up a 100-bed hospital and run various services, including a surgery department and counselling for patients.
Sickle cell anaemia, a hereditary blood disorder, is characterised by red blood cells assuming abnormal, rigid, sickle shape, resulting in various complications and leading to the shortening of life expectancy.