Ronald McDonald House provides accomodation for families of sick children receiving treatment at the nearby Royal Manchester Children's Hospital and St Mary's Neonatal Unit.
Nearby homes are also being cleared, along with Wilmslow Park student accomdation.
Police have also increased their presence outside a flat in Granby Row where killer Salman Abedi is believed to have assembled his deadly bomb.
Ronald McDonald House has been evacuated in Manchester
A statement by Greater Manchester Police said they found a car which "may be significant to the invesitation" into the Manchester attack last month.
A 100 metre corden has been established as police investigate what they describe as "potentially a significant development".
MANCHESTER EVENING NEWS
Police at the scene of the evacuation in Manchester
Detective Chief Inspector Rush Jackson said: "This is potentially a significant development in the investigation.
"The car is a white Nissan Micra that has been located at Devell Court, not far from Banff Road.
Ronald McDonald House in the south of Manchester has been evacuated
"We are very interested in anything people can tell us about the movements of this car, and who was in it, over the past few months."
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Ronald McDonald House said in a statement: “We are working closely with our partners to ensure public safety and to relocate people while we carry out this precautionary measure to ensure everyone’s safety.”
Mourning for Manchester: The world pays tribute Thu, May 25, 2017
Makeshift memorials and tributes to victims of the deadly attack at an Ariana Grande concert.
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Britain's Queen Elizabeth visits the Royal Manchester Children's Hospital in Manchester
The development came as the Duke of Cambridge visited Greater Manchester Police HQ to meet officers who were among the first to respond to the bombing.
Twenty-two peope were killed and more than 100 injured when a terrorist blew himself up at an Ariana Grande concert on May 22.
Ten men, aged between 18 and 44, remain in custody on suspicion of terrorism offences in connection with the attack, police have said.
Six people, including a 15-year-old boy, a 34-year-old woman and four men, have been released without charge.