The ACT Government has been given the green light to develop all the suburbs proposed for Molonglo after agreeing to greater protection of woodlands and the river.
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As part of its approval, the Federal Government called for the formal establishment of the Molonglo River Park to help prevent pollution to the Murray-Darling River system from the expected 55,000 new residents.
The strategic assessment of the Molonglo Valley development is one of the first of its kind in Australia in relation to urban development.
Stage 1 of the East Molonglo development, containing the suburbs of Coombs and Wright, is already under construction.
The ACT is now free to develop Stage2, for 18,000 homes in two as-yet-unnamed suburbs, to the north of the first stage.
Officials said bulldozers were expected to begin work on Stage 2 in about 12 months after detailed design work was completed.
Stage 3, to the immediate west of the Canberra International Arboretum, will be developed within a decade.
Prospective residents in Stage2 will have easy access to William Hovell Drive via the new John Gorton Drive over a proposed high-level bridge near Coppins Crossing.
While the development will destroy box gum woodland, other ''offset'' areas of woodland will be preserved by redrawing the boundaries of the new suburbs.
The agreement says the ACT Government has committed to the protection of more box gum woodland than first proposed, which provides extra habitat for superb and swift parrots and the pink-tailed worm lizard.
Federal Environment Minister Tony Burke said he was pleased that areas of the Molonglo River, where he kayaked, would be protected.
He said the new federal approval process was an ''environmental docking station'' to cover areas of proposed urban development, rather than suburb by suburb.
ACT Environment Minister Simon Corbell said the agreement on environmental conditions would provide certainty for long-term growth.
''This decision has given the green light to planning and development to begin in the ACT's next frontier, the Molonglo Valley, which will involve the construction of affordable housing for up to 55,000 people,'' he said.
''This also achieves significant conservation outcomes for matters of national environmental significance like habitats for nationally threatened species and ecological communities such as the pink-tailed worm lizard, natural temperate grasslands and box gum woodland, which is also a foraging habitat for the swift and superb parrots.''
Mr Corbell confirmed the Federal Government had asked for changes to boundaries.
''The main environmental gain is the development of the Molonglo River park which basically follows the river,'' he said.
''This is a requirement the Commonwealth is placing on us to allow us to develop the area.
''We'd always anticipated we would have that river park but the size and the exact boundaries were the issue of detail we've been working through with the Commonwealth.
''There will also be a series of ponds developed along the river for water management purposes.
''Originally the proposal was for one large water body like a small lake. That is not proceeding, instead there will be a chain of stormwater ponds.''
Greens MLA Caroline Le Couteur said she was pleased with the outcome.
''We understand the Commonwealth has made a number of stringent requirements on the ACT,'' she said.
