Approval has been granted for the construction of Sydney's multi-million dollar Walsh Bay arts precinct.

The New South Wales Government's proposal hit a hitch when local restauranteur Brigid Kennedy successfully challenged the project in the NSW Court of Appeal.

The Walsh Bay Arts Precinct project includes a $207 million rejuvenation of Pier 2/3, Shore 4/5 and Wharf 4/5 to create a new arts precinct for performing arts companies.

Future tenants will include the Sydney Theatre Company, Sydney Dance Company, Bangarra Dance Theatre, Australian Theatre for Young People, the Sydney Philharmonia Choir, the Australian Chamber Orchestra and the Bell Shakespeare Company.

Construction should finish in 2020, a year behind its initial schedule.

“We've been making sure that all of the tenants at Walsh Bay and all of the arts organisations that are there in the future are happy with what we're doing,” Arts Minister Don Harwin said.

“We're absolutely delighted that we have got the consent to go ahead now from the planning approval process and also from the tenants.

“We want an accessible precinct, which lots of people visit, because we know people will be absolutely thrilled with the offering at Walsh Bay when it's finished.”