Prime Minister Tuilaepa Sailele Malielegaoi said the central building, which was built in 1902, was riddled with termites and had been condemned.
The top floor of the new building would be a hotel and the ground floor would be turned into stores and a museum, he said.
But AUT University's Professor of Pacific Studies, Tagaloa Peggy Fairbairn-Dunlop, said the German-designed building was a key part of Samoa's history.
"I would say I feel shattered and quite despairing of what I would see as quite a casual consideration of a heritage building," Professor Fairbairn-Dunlop said.
"Are there no other ways we can consider preserving some of the past as it was?"
The UN world heritage agency UNESCO described the building as one of the few remaining timber structures of German colonial design in the world.