The CBD and South East Light Rail will link Circular Quay and Central, the Moore Park sporting and entertainment precinct including the Sydney Cricket Ground and Sydney Football Stadium, Randwick Racecourse, the University of NSW and Prince of Wales Hospital at Randwick.

It extends from Circular Quay along George Street to Central Station and Moore Park, then to Kingsford via Anzac Parade and Randwick via Alison Road and High Street.

"This is a priority project for the NSW Government that will transform Sydney, deliver over $4 billion worth of economic benefits and create 10,000 jobs for NSW," Ms Berejiklian said.

"I am delighted the project has received formal planning approval. The NSW Government is getting on with the job of building new infrastructure that will improve services for transport customers, increase productivity and support economic growth.

"Light rail will bring major benefits for Sydneysiders including significantly improved access to modern and reliable public transport, access to sporting, entertainment, health, and education precincts, a boost to local businesses, and we have no doubt it will also result in urban renewal and economic development."

Ms Berejiklian said approval of the CBD and South East Light Rail includes conditions to address key impacts during construction and operation of the new light rail system.

"We recognise that there are challenges ahead, and delivering a project of this scale in a busy urban environment will result in impacts to communities and businesses during construction.

"We have listened to the community and these conditions will ensure that during construction and operation of the CBD and South East Light Rail, potential environmental, noise and traffic impacts are managed well.

"I would like to thank the community, businesses, and our key project partners for their contributions and continued support on the CBD and South East Light Rail project and for the feedback provided."

Ms Berejiklian said hundreds of community members and stakeholders attended information sessions held in their neighbourhood in recent months, taking the opportunity to find out more about light rail. There were over 480 submissions made to the NSW Department of Planning and Environment.

Transport for NSW will continue to keep the community informed throughout delivery of the project through project updates, letter box drops, the website, and notices in local newspapers.

Local business and community forums are also being established in each precinct along the light rail route.

The main contract to design, build, operate and maintain the new system is expected to be awarded as a Public Private Partnership (PPP) by early 2015 with major construction commencing soon after.

The service is expected to be open and operational in 2019 or 2020.