There are fears a plan to raise Warragamba Dam's wall could put a vulnerable-listed bird at further risk after the bird was discovered in the Blue Mountains National Park.
The painted honeyeater was discovered by Australian National University researcher Ross Crates last week in the Burragorang Valley which sits within the Blue Mountains National Park.
He warns its habitat could be lost by the NSW government's plan to raise the dam wall by about 14 metres which will see the area flooded through a "controlled release" of water.
The valley is the third known location throughout NSW, northern Victoria and southern Queensland where the painted honeyeater has been found.
Although they aren't as at-risk as the critically endangered regent honeyeater - which has also been found in the area - Mr Crates warns they could end up in the same position if they keep losing their habitat.
Community group Give A Dam spokesman Harry Burkitt said the discovery is another example of a threatened species being pushed to the "brink of extinction" by the plan.
The NSW government believes the Warragamba proposal will reduce and manage flood risk in the Hawkesbury-Nepean Valley.
While raising the wall will have "very significant" benefits in reducing the flood risk to those living in the floodplain, it is "very important" the NSW and federal governments fully understand the potential impacts of the proposal, an Infrastructure NSW spokeswoman told AAP.
Assessments have been undertaken of all "likely occurring" threatened species including the regent honeyeater and potential impacts will be included in the environmental impact statement.
The environmental impact study is due to be published for public comment in 2019.
Australian Associated Press