The NSW government has approved the expansion of Sydney's $6 billion Barangaroo development to include a controversial hotel.

Premier Kristina Keneally said "After a merit-based assessment process, the NSW Government has given planning approval for the amended concept plan for the $6 billion Barangaroo development.

The amended concept plan secures Barangaroo as Sydney's future economic precinct, allowing more floor space and a landmark hotel on a public pier.

Early construction works at Barangaroo have already started (under previous approvals) and the project will support 3,000 construction jobs over the next decade.

In line with recommendations from the Department of Planning, the amended Lend Lease concept plan was approved this week by Planning Minister, Tony Kelly.

The decision has drawn mixed reactions.

The Alliance for NSW Future said today the NSW Government's approval of the amended concept plan for Barangaroo South is a major victory for jobs and the NSW economy.

"This decision is a real shot in the arm for confidence in much needed investment in NSW," said Patricia Forsythe, Alliance member and executive director of the Sydney Business Chamber.

Infrastructure Partnerships Australia Chief Executive, Brendan Lyon, said the project was critical to restoring confidence in the State's ability to deliver major projects.

"Barangaroo's success will be watched by investors everywhere who are eager for NSW to repair its reputation after the axing of the CBD Metro which did significant damage to our reputation as a place to do business," Mr Lyon said.

"It will be an exciting project for everybody because it will equip NSW to compete strongly with regional powerhouses like Singapore, Shanghai and Hong Kong."

TTF Managing Director Christopher Brown said the amendment represented "a significant down-scaling from the initial design and has endeavoured to take on board all the submissions and community feedback".

"While compromise by its nature cannot appease all interests we need to now consider the common good. This project is that important," he said.

Mr Brown said he was particularly pleased the creative hotel design was approved.

"This will be the first major luxury hotel built in Sydney CBD for years. I have no doubt it will become an icon and a magnet for further investment and tourism opportunities in NSW."

Meanwhile, the National Trust expressed dismay at the Minister for Planning's decision to approve the fourth modification of the Barangaroo concept plan earlier today.

Scott Woodcock, public relations director for the National Trust, said there has been a comparative absence of objectivity and transparency throughout the entire post?competition process.

"The Minister was never going to refuse the Premier's pet project," Mr Woodcock said.

"The Minister even had the Barangaroo plans displayed on the walls of his office."

"The NSW Government is the landowner, project manager, planning consent authority and principle financial beneficiary of the Barangaroo development.

According to him, the Barangaroo decision making process is perceived by many as pre?determined and biased.

"This has been compounded by the disproportionate influence of a past Prime Minister, evoking parallels with Panama hat politics in other states," he said.

"Barangaroo was always intended to inherit the spirit of the working harbour. A cruise ship terminal was required by the Planning Minister to be constructed as a condition of consent on the initial concept plan approval. Instead we are left with an overblown park.

Mr Woodcock said, "This is a poor planning outcome with absolutely no respect for area's rich and diverse maritime heritage.

The National Trust said "The NSW Government's failure to realise a fine grained development sympathetic to the adjoining Millers Point, the harbour and the overwhelming maritime history of the site is a damning indictment on the process.

"The National Trust is resolved to fight this approval and achieve a sustainable inclusive Barangaroo."