The $139 million revamp aims to turn the waterfront between the Harbour Bridge and Barangaroo into a cultural hub for international festivals and events.

Planning approval for the ambitious undertaking was announced on Thursday night in a joint statement from acting Premier and Arts Minister Troy Grant and Planning Minister Rob Stokes.

The approved concept includes:

• a public square over the water between Wharf 4/5 and Pier 2/3, with large steps leading down to the water;
• an outdoor performance area;
• new restaurants and bars ;
• upgraded rehearsal, production and performance spaces;
• revamped Bangarra dance and Bell Shakespeare theatres;
• a 200-seat theatre and studio space for the Australian Theatre for Young People;
• a 450-seat concert hall for the Australian Chamber Orchestra;
• changing the internal layout of Pier 2/3, for arts and cultural events like the Sydney Writers' Festival.

"This investment will make Walsh Bay a renowned cultural precinct in the Asia-Pacific, giving the NSW public better access to exceptional artists and performances," Mr Grant said.

The site design was informed by other international refurbishments of industrial areas that have become arts precincts, such as the Tate Modern in London and the Carlsberg Brewery in Copenhagen. It was pitched as a long-term venue for Biennale of Sydney.

Mr Grant had previously said that within five years of the upgrades being completed, the government expected visitor numbers at Walsh Bay to more than double to 2 million.

Mr Stokes said the plan, which secured funding through the state's $600 million arts and cultural infrastructure fund, would be a boom for the arts and the broader community.

"Walsh Bay is also a key part of the development of a Sydney CBD arts precinct, to encompass our internationally renowned cultural institutions," Mr Stoke said.

"The precinct is part of the NSW government's vision to activate and open up the Sydney Harbour foreshore, alongside the Barangaroo redevelopment and Bays Precinct," he said.