The NSW government late on Monday gave the green light to James Packer's plan for a second Sydney casino at Barangaroo.
NSW Premier Barry O'Farrell has announced cabinet approval for a VIP-only casino as part of Mr Packer's $1.5 billion resort at the harbourside development site.
Legislation to allow a second Sydney casino licence will be introduced to Parliament this week.
Mr O'Farrell said approvals were still needed from gambling authorities and the planning department.
The Independent Liquor and Gaming Authority would need to approve Mr Packer's company Crown as a suitable casino operator and plans for the six-star hotel resort would need planning department approval.
"We support this proposal because of its economic benefits for NSW," Mr O'Farrell said.
The gaming facility will be allowed to operate at the Barangaroo site from November 2019.
The agreement for the casino includes no low-limit bets on table games, no pokies and VIP gaming only.
The government said licence fees and gaming taxes would reap a guaranteed minimum of $1 billion over the first 15 years of the casino.
Mr O'Farrell defended the step that puts Sydney on the path to becoming the only Australian capital with two casinos. "This is about high-worth individuals engaging in gaming," he said. "It's estimated - and on the basis on Crown's Victorian experience - that 5 per cent of local gamers would use this facility, but these are people who would gamble between $300,000 and 400,000 a year - clearly beyond the means of most people."
The decision marks a setback for Crown's competitor, Echo Entertainment, owner of the Star casino at Pyrmont. Echo has an exclusive casino licence in NSW until November 2019, and had argued the NSW government should approve a $1.1 billion expansion proposal, including an extension of exclusivity until 2034 in return for a payment of $250 million.