NSW Minister for Energy and the Environment Matt Kean joined representatives from Port Stephens Koalas, the council, parliamentarians and other dignitaries that have supported the $3 million project at Treescape in One Mile on Sunday to break ground at the site where the sanctuary will be constructed.

The sanctuary, inclusive of a koala hospital, is due to open in early 2020.

"From council staff, to our partners at Port Stephens Koalas and their wonderful volunteers, the NSW Government and the entire community, this project wouldn't have been possible without a dedication to working together for the benefit of this species and our region - thank you all for your continued support," Port Stephens Mayor Ryan Palmer said.

"Australia boasts a $1 billion koala tourism industry and this facility also poses an exciting and profitable tourist opportunity for council.

"Koala Sanctuary is a world-class facility and a destination in itself - one that will support Port Stephens' reputation as one of Australia's most desirable places to visit."

Following a welcome to council by Worimi elder Neville Lilley, smoking ceremony by Worimi man Leigh Ridgeway and speeches, Mr Kean, Cr Palmer and Carmel Foster from the council, the state member Kate Washington, federal member Meryl Swanson, Ron Land and Carmel Northwood from Port Stephens Koalas grabbed a shovel and turned the first sod at the sanctuary.

Construction for the sanctuary will be completed in two stages.

The first will see the creation of the koala compounds and elevated boardwalk, pathways, internal access roads and car parking to support tourist vehicles.

Stage two will see the koala clinic and tourism centre established.

More to come.

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