Health play specialists at Yorkhill Hospital have set up the scheme to help make young patients familiar with their treatments.
The Teddy Bear Hospital, for inpatients and outpatients, will use play to help ease the stress of being in hospital.
Jo Feeney, health play specialist, said: "A lot of children are really frightened by being in a medical environment.
"We use the toys pre-treatment to explain to them what will be happening to them and during their treatment to help them work through any anxieties they might have.
"Some children come in unexpectedly and end up in intensive care - they can be quite traumatised by their experience, so play therapy helps at that stage too.
"I had one mum say that her daughter was asking questions through her teddy - 'Will it hurt teddy?', Will teddy get better?' - and it helped her through her hospital experience."
Schoolgirl Hailey Adamson opened the Teddy Bear Hospital, watched by her mum Charlene Monahan.
The five-year-old has been attending Yorkhill regularly since the age of eight months, when she was diagnosed with severe stomach problems.
Hailey, from Hillington, was sent to Great Ormond Street Hospital in London for a test that is not available in Glasgow.
It was found the left side of her colon does not work and the youngster had to undergo an operation to fit an ACE stoma.
She now visits Yorkhill three times a week to have the device checked and cleaned.
Charlene, 29, said: "Yorkhill is like our second home now, but Hailey has had that much done to her she's got a real fear of the place - she is traumatised.
"She works with Jo - she'll only work with her as they have a really good bond - and last week she came in here to play.
"Hailey did to the teddies what she's had done to her and it really helped her to process what she's been through and to ask questions.
"Afterwards she came out and said, 'I don't need to be scared any more.'
"This will really help young children to understand what is happening to them."
The mini hospital has a number of area focusing on different hospital equipment and procedures, including X-rays, CT scans and plaster casts.
Funded by the Yorkhill Children's Charity, they have been designed to provide therapeutic play to give patients a greater understanding of healthcare and reduce any associated fears whilst visiting hospital.
Using real and toy medical equipment, the specialist play staff can prepare children for what might happen while they are in hospital.
Using play and a variety of distraction techniques they help children cope during painful or uncomfortable procedures.
Post-op role play will also take place where children can be observed playing with equipment.
This can provide them with an outlet to express feelings about their illness or procedures and allows the opportunity to clear up any worries they may have about their treatment.
Jamie Redfern, general manager for Hospital Paediatrics at NHS Greater Glasgow and Clyde, added: "For many children or young people, coming into hospital can be very daunting.
"The environment can be frightening, with lots of different adults making decisions for them and strange looking equipment that they suspect might hurt.
"They may be feeling unwell, be in pain or have had a previous traumatic experience.
"Therefore we can understand why, for some children, hospital can be a very scary place.
"We look forward to welcoming the children into the Teddy Bear Hospital to help make their and their family's stay in hospital a more positive experience.
"The evolution of the Teddy Bear Hospital at Yorkhill has been made possible thanks to the funding efforts of Yorkhill Children's Charity.
"I would also like to thank Build A Bear workshop in Buchanan Galleries, Glasgow for providing us with several teddies for this project and being part of this exciting new addition to The Royal Hospital For Sick Children at Yorkhill."