Sydney Harbour's Glebe Island port will be drastically scaled back as government officials announces the building of the city's newest suburb, with 8500 homes to be delivered.
Bulk material handling through the port, including cement, gypsum and sugar, will be closed by 2030 and shifted to Port Kembla, south of Sydney.
The government will spend $270 million improving road connections around Port Kembla and investigating increased rail freight capacity.
Sydney's Working Port Coalition was quick to express its "extreme disappointment" with the decision, arguing the project had major economic, supply chain and environmental risks.
Premier Chris Minns dismissed criticism that just 10 per cent of the 8500 new homes would be affordable or designated for essential workers, arguing billions of dollars had already been spent on those types of housing in other projects.
"If the premise of new homes being built in Sydney is they can only go to less well-off areas, then we won't be spreading the housing load across Sydney's metropolitan area," he said.
"We have to make a decision in favour of housing, in favour of public transport, in favour of access to the foreshore and the most beautiful harbour in Sydney."
The government boasted the new suburb was minutes from the city centre, connected to multiple public transport options - including a near-$1 billion metro station under construction - and converted underused land into housing.
The premier called the project a game-changer and city-shaping, while Planning Minister Paul Scully said it was also a big boost for Port Kembla.
The Glebe Island project was floated as a back-up plan when another controversial proposal - turning Rosehill Racecourse into a 25,000-home mini-city - fell apart.
Committee for Sydney CEO Eamon Waterford said the plan featured much to celebrate, but questioned why the affordable and essential worker housing level had dropped from a proposed 30 per cent.
"Comparable sites in London mandate 50 per cent affordable housing - more ambitious targets for affordable housing would help ensure the people who keep our city running can live in or near the communities they serve," he said.
Speaking on behalf of the port coalition, Business Sydney executive director Paul Nicolaou said the call ended the harbour being used as a working port.
The government has said it will consolidate the harbour operations into nearby White Bay, while also building a new staging area there to ensure fireworks displays including New Year's Eve can proceed.
"For the past two years, the (port) coalition, which is made up of 24 organisations that support the retention of the port, has consistently highlighted the significant economic, supply chain and environmental risks associated with this planned course of action," Mr Nicolaou said.
Urban Taskforce CEO Tom Forrest congratulated the government on rejecting "selfish and myopic voices" trying to preserve the port.
A station for Sydney's driverless metro is under construction near the site as the government continues with its plan to build more housing around the stations.
NSW is behind on its commitment to deliver 377,000 new homes by 2029 under nationally agreed targets.
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