The state government money will fund a new five-leg roundabout on the western edge of the city, on Gunnedah Road near the airport turn off.

Tamworth mayor Col Murray said the $9.5-million roundabout was a "cornerstone investment" that would "activate this whole industrial precinct", referring to the land surrounding the proposed roundabout.

"This provides the main gateway to the new industrial area," Cr Murray said.

"We've been working on this project for a couple of years."

The roundabout is large enough to accommodate B-triple road transport and also serve as the new turnoff to the airport.

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"It will be quite a large roundabout, probably one of the largest we'll see in this area," Cr Murray said.

The design and planning is expected to be completed by the end of the year, with construction set to start shortly after.

The rest of the funding will go towards stormwater drainage, a crucial step for the greenfield industrial estate, and connecting Jewry Street to Wallamore Road to create a direct link to the new precinct.

Tamworth MP Kevin Anderson said the "significant $20-million investment" would allow the city to continue developing its "transport master plan", while allowing the "industrial heavy artillery" to move in.

"This will unlock a boom in businesses," he said.

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"It unlocks unlimited potential for what this city is capable of achieving. This whole precinct has been earmarked for industrial growth.

"We will no doubt see new jobs, new business, new investment in what will be the transport hub of northern NSW."

Mr Anderson said the new 246-hectare estate was vitally important with the Glen Artney industrial precinct full, bar recently re-developed Federation Park.

"I don't know how many calls I get from real estate agents and people looking to invest in this city, asking when this section will open up," he said.