Parts of Wallingford Community Hospital could be sold for housing.
Hospital managers claim the site is too large to be efficient.
They are talking to South Oxfordshire District Council about allocating parts for housing in the Local Plan, the council's planning guide for 2001-2011.
News of a possible sell-off comes hot on the heels of the hospital's £500,000 refurbishment and a successful campaign three years ago to save it from closure.
Wallingford mayor-elect and planning consultant Nigel Moor condemned this latest move, saying the hospital's tentative proposals were unnecessary when so many other town centre sites were available for development.
"It is totally irresponsible," he said.
"We will use our Wallingford Town Plan to prevent any non-hospital use on that site.
"There's no justification to contemplate any housing development there."
Concerns have been raised that the hospital may seek to sell its plot, known as the Paddock, off Reading Road, which is leased to the Wallingford Sports Trust and used by Crowmarsh Boys football team. Sports trust chairman Peter Abery said a new five-year lease was being finalised, but the hospital had inserted a one-year notice-break clause.
Ally Green, a spokesman for Oxfordshire Community Health NHS Trust, which runs the hospital, confirmed: "The site at Wallingford is large and it does need to be developed.
"But the plans are in no detail yet and there are no immediate plans to take them forward."
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