The NSW Government on Sunday backed plans to forge ahead with a toll-free tunnel linking Blackheath to Little Hartley, eliminating a renowned traffic grid-lock section that's choked the Great Western Highway during busy holiday periods for years.

The 11-kilometre tunnel - a stretch that would be Australia's longest tunnel - has been confirmed as the state government's preferred option to fix the issue following an in-depth feasibility analysis and extensive investigation process.

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"This is a history-making legacy project that will deliver safer and more efficient journeys ... travelling between the Central West and the East Coast," Deputy Premier and Minister for Regional NSW Paul Toole said.

The tunnel will reduce congestion and improve safety for local residents, tourists and freight operators, Mr Toole said.

He added the government has been looking at the tunnel option since May, 2021 and revealed work on the "complex, ambitious plan" is planned for the start of 2023.

The tunnel's design features dual carriageways for both eastbound and westbound motorists in separate twin tunnels and a gentler gradient, which Mr Toole says will cut travel times and improve freight efficiencies.

Minister for Regional Transport and Roads Sam Farraway said the Blue Mountains tunnel would deliver a raft of benefits that would transform the connection between Sydney and western NSW.

The tunnel work is part of the major Great Western Highway upgrade between Katoomba and Lithgow, and Mr Farraway says the project will improve the economic development, productivity and accessibility across the Central West and, once complete, save motorists around 30 minutes during busy periods.

"It will improve the resilience of the state's major road corridor across the Blue Mountains during traffic incidents and natural disasters and will be built to accommodate future population growth west of the Blue Mountains." he added.