The HMAS Psyche, a 95-metre-long lightweight cruiser, lies 4.2 metres below sea level on the bottom of the Bay about 200 metres off Roy Wood Reserve.

In 1940, a typhoon-like storm flipped the large cruiser, which was given to the Royal Australian Navy in 1915, to its side, eventually sinking to its final resting place in the bay between Corlette Point and Salamander Bay.

The Port Stephens Naval Association has gone through the council approval process to install a memorial to the HMAS Psyche in Roy Wood Reserve.

"A lot of people don't know the Psyche is there," naval association president Bob Parish said.

"This boulder, and plaque we want to put on it, will point to where the Psyche is."

The large boulder shaped as a hull sits with no plaque in the reserve.

Mr Parish said the association was saving funds to ensure a plaque was fitted before the official unveiling on July 1, 2015.

"It will be 100 years on July 1 next year that the Psyche has been Australian," Mr Parish said. "We're going to have a ceremony and unveil the rock, and hope to have a ceremony each year after."

Mr Parish said next year's unveiling was particularly special as it marked the navy's involvement with the 100th centenary of Anzac.

To help the naval association's fund-raising for the plaque phone Mr Parish on 4981 7946.