The NSW government has bowed to pressure and will build a new primary school in Green Square, which is expected to become Sydney's most densely populated suburb by 2030.
The government will sign a memorandum of understanding with the City of Sydney on Tuesday at the former South Sydney hospital site.
The decision follows ongoing criticism from community leaders including Sydney lord mayor Clover Moore, developers and community groups over the lack of plans for a new school in the rapidly-growing suburb, which is surrounded by schools that are already at or over enrolment capacity.
The City of Sydney has one of the highest projected rises in school-aged residents of 41 per cent over the next 10 years, and school enrolments have already been growing by more than 13 per cent since 2012.
Cr Moore has previously called on the state government to do more to meet a potential capacity crisis created by the apartment-building boom in the area.
"The two biggest priorities need to be transport and schools," Cr Moore said.
Limited space and land cost concerns in dense suburbs have led to many new schools being built as high rises, including the recently announced three-storey Ultimo Public School and a new 14-storey high school in Surry Hills.
Education Minister Rob Stokes, who will announce the new school alongside Cr Moore, recently committed $5 billion to tackling a projected surge in school enrolments of 21 per cent, or 164,000 students, by 2031.
It will include a rethink of the way schools are built and run, including a shift towards sharing facilities with communities, a change in the maximum enrolment capacity of schools and utilising smaller sites to build larger schools.
It is understood the new school at Green Square will include integrated communities facilities, including a creative centre, childcare centre, library and plaza and parks.