"Villawood Detention Centre was built in 1949 and it has been in desperate need of improvement for a long time," Mr Clare said.
The $186.3 million project will include design development, community consultation, operational planning, tender documentation, construction, final fit-out and the commissioning of the new centre.
"This is a massive infrastructure project. It is the biggest infrastructure project in our local area and will create lots of local jobs," Mr Clare said.
The redevelopment works will be done in stages, with the project expected to be completed by 2014.
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