Canadian Blood Services said the bank will let the public donate rather than discard umbilical cords, which are a rich source of stem cells.
Some 1,000 Canadians are currently waiting for life-saving stem cell transplants to treat diseases such as leukemia, lymphoma or aplastic anemia, according to Canadian Blood Services.
The group said Canada was the only G8 nation that doesn't have a national public cord blood bank.
Robert Klaassen, a hematologist/oncologist at the Children's Hospital of Eastern Ontario in Ottawa, said the new cord blood bank is "long overdue."
Klaassen said having our own national cord blood bank will shorten wait times and increase the pool of potential matches when stem cells are needed, while
"The main problem we have is that many patients when they need a bone marrow transplant don't have a brother or sister or sibling to match to so we have to start looking for unrelated matches," said Klaassen.
"It's very difficult to get the bone marrow itself because you have to get a perfect match, it's very unforgiving whereas the nice thing about cord cells is because they are from a newborn baby they tend to be more accepting of the fact that it's not their normal environment," he said.
By next year hospitals in Brampton, Edmonton and Vancouver will also be able to collect cord blood donations for the public bank.
Similar private banks already operate, but CReATe Cord Blood Bank founder Dr. Clifford Librach said the launch of the public bank taking donations for use in non-family patients will spread the word about umbilical cord donations.
"It increases awareness for patients who may not have been aware of this whole process or their options,” said Librach.
Klaassen said his issue with private banks is that the chances of a child needing their own cord blood is infinitesimally small, while those children with rare disorders who may need it won't be able to access it.
CBC News health commentator and physician assistant Maureen Taylor said the cord bank could potentially improve the selection of potential matches for doctors.
"We need a large selection of different people's cord blood in order to be able to get the match right," said Taylor.