TWEED River Art Gallery's new Margaret Olley Art Centre is one step closer to becoming a reality following an announcement by the NSW Government it will contribute $200,000 towards the project.

NSW Minister for Tourism, Major Events and Minister for the Arts George Souris was joined by his colleague and friend, NSW Deputy Speaker and local MP Thomas George at the gallery today to announce the grant.

Minister Souris said the funding was a reaffirmation of the commitment by the NSW government to the arts in regional NSW.

"The government intends to give the regions their fair turn, for a change," Minister Souris said.

Regional NSW could look forward to more programs and more funding in the future and as long as the coalition remained in power in NSW, the government would maintain this attitude.

"The Tweed was lucky to have a life wire community and council, resulting in a vibrant community," Minister Souris said.

The gallery's Margaret Olley centre had the potential to inject about $2.7 million a year into the Tweed's economy and attract an increased number of interstate and international tourists to the shire.

The centre's total cost is estimated to be around $3.5 million and a large part of the required funding is in place with the Margaret Olley Foundation donating $1 million, the federal government contributing $1 million, the state government handing over $200,000 and the gallery receiving around $500,000 from donations and the efforts of the art gallery support group, Friends of the Gallery.

Gallery director Susi Muddiman said the gallery was short around $600,000 to $800,000.

However, donations continued to flow in allowing work on the new centre to begin as soon as Tweed Shire Council approved a development application currently under consideration.

"The new centre is a significant project for the gallery and it's nice to know we have the support from the state government.

"We welcome the contribution and look forward to applying for more funding in the future," Ms Muddiman said.

Tweed Shire mayor Barry Longland said "Tweed River Art Gallery's standing as one of Australia's leading regional galleries will be further enhanced by the centre which will include many treasured pieces by the iconic artist".

The Margaret Olley Art Centre will contain recreations of three rooms of Margaret's famous Paddington home and include the Hat Factory and the Yellow Room.

The final design will be unveiled at an event at the gallery on October 26 which will be hosted by the Tweed River Art Foundation and the Friends of the Tweed River Art Gallery.