But the former CIT and Woden Valley High School site in Woden is not being considered for the relocated campus.

Vocational Education Minister Meegan Fitzharris has revealed the government is investigating the "best potential location for a new purpose-built facility" for the training institute in the Woden town centre.

The new campus will "ensure CIT can keep delivering flexible, digitally progressive courses that develop the skills we need for the future of the Canberra economy", Ms Fitzharris said.

"Woden is in focus because we see the future of this region as an active and thriving centre of business and education, equipped with transport links and community facilities that will benefit Canberrans for years to come," she said.

"Positioning CIT with a major presence in the heart of Woden has the potential to enhance the town centre and create an energy around a new campus that will open up a range of opportunities for CIT staff and students, local businesses, industry and the broader community."

The surprise announcement was not in Tuesday's budget, but was funded through last year's budget.

It comes as the government continues discussions with UNSW about taking over the CIT Reid site.

The university revealed ambitions in 2017 to develop Reid CIT and a prime slab of land on Constitution Avenue into a second Canberra campus, which could eventually host 10,000 students.

But the announcement also comes as the government prepares to knock down and sell the old Woden CIT.

The Woden CIT campus closed in 2018 after a new site opened in Tuggeranong in 2015.

The closure was part of the training institute's campus modernisation strategy, where it shed surplus assets and expanded its online offering.

Ms Fitzharris said they were not considering returning CIT to the old site because it had "reached the end of its life".

"What we're proposing now is a new, state of the art, modern facility built specifically for CIT that would be fit-for-purpose in ways that the old campus in Woden was not," Ms Fitzharris said.

"The sites we want to investigate now will be closer to the Woden town centre to make the most of the bus interchange, the future light rail line and the opportunities to build strong connections with local businesses, industry, and the broader community.

"The government is considering the best use of the old CIT site in Woden and will have a further conversation with the community about this, noting it is currently zoned for community use."

City Services and Community Facilities Minister Chris Steel said a new CIT in Woden had the potential to an "anchor investment" in the town centre.

"A revitalised town centre is being supported by the ongoing investment in light rail, funding to redevelop the Woden Bus Interchange, planning and design for a new Woden Community Centre, as well as the ongoing investments in the Canberra Hospital, the new Woden bus depot and the popular Woden Experiment," Mr Steel said.

Ms Fitzharris said the scoping study would also look at how a new facility could help CIT offer new courses "that develop the skills we need for the future of the Canberra economy".

Chair of the CIT Governing Board Craig Sloan said campus renewal was "key to the evolution of CIT's ability to provide economic and social enablement to the ACT economy via contemporary vocational workforce solutions".

"Industry and students have told us traditional classrooms isolated from employers and removed from the broader ecosystem are no longer capable of meeting the needs of the changed world of work," Mr Sloan said.

"CIT needs to continue to evolve to transform the way we teach to help equip students with the vocational education, industry relevance and skills needed for the ACT to prosper."

The government is developing the terms of reference for the analysis of site options now and will look to hire a consultant.

A decision on the future of the sites will be known by late 2019 or early 2020.