The development, on the corner of the Federal Highway and Old Well Station Road, will include 29 serviced caravan and camping sites and 480 beds in short-stay accommodation, aimed at the likes of school groups. It will have a dining hall, bus drivers' accommodation and parking for 47 cars and 12 buses.

The site is being developed by FreeSpirit, which has two holiday parks in Darwin, one at Hervey Bay, Queensland, and one in Adelaide. It won the project in a tender.

The site was sold to the government-owned Exhibition Park in 2014 for $1.5 million.

Government deputy director-general of economic development Gary Rake said the site was being leased to FreeSpirit for 15 years, with two 15-year options in a deal that was commercial in confidence. FreeSpirit would build and operate the accommodation.

Work was expected to begin within three to four months, with dormitories, cabins and caravan sites ready within six months from when construction began. A later stage would include a motel.

Mr Rake said the focus would be on visiting schoolchildren, sporting groups and tourists.

"In particular, there is an increasing number of interstate school children visiting the nation's capital and the dormitory component of the development will accommodate more than 400 children a night," he said.

As part of the planning conditions, buses will not be allowed to turn right from Old Well Station Road on to the Federal Highway, but will instead have to turn left and head north, then use the Antill Street roundabout to get into the southbound lane.