A development application for the multi-million dollar project on the Oxley Highway has been approved after a nine-month wait.

Gunnedah Shire Council submitted its application to the NSW Northern Regional Planning Panel in March and acting general manager Colin Formann said the approval was good news for the shire.

"Approval of the development application is the tick that was needed to allow Gunnedah Shire Council to go ahead with construction of the Koala Sanctuary," Mr Formann said.

"Council continues to look at options for the eventual operation of the sanctuary, a process that will run alongside construction.

"We remain very positive about this project and what it will mean for both koala conservation and tourism in Gunnedah."

The development application included plans for a koala hospital, a camping ground, accommodation and other activities.

The sanctuary was originally going to be run by CaPTA, but the Queensland tourism operator pulled out in September, citing financial difficulties due to COVID-19.

Preliminary preparation works for the project are already in motion on the 50-acre bushland site where 10,000 koala-friendly trees have been planted.

The sanctuary project was awarded $6.48 million in June 2018 through the state government's Regional Social Benefit Infrastructure Fund.