Chief Minister Andrew Barr has announced an agreement to transfer the site of the old Watson school to the Academy of Interactive Entertainment, more than a year after negotiations started between the two parties.

The sale hasn't been officially ticked off just yet, with the academy still needing the government to approve its final plans for the redevelopment before the land is handed over.

But the agreement is nevertheless a significant milestone in the gaming, animation and film school's long-held ambition to redevelop Canberra Technology Park, which it has been the major tenant of since 1996.

The academy approached the Barr government about buying and developing the site in 2014, pitching a $111 million vision which included plans to build new student accommodation, create a new sound stage and refurbish the existing buildings.

The government agreed last year to start exclusive negotiations with AIE after community feedback showed broad support for the precinct's redevelopment as an education-focused campus, provided the adjacent park was retained.

Under a deal to be announced on Sunday, the park, off Windeyer Street, will be preserved and upgraded.

The academy will pay to build new public tennis and basketball courts at the site as part of its contribution.

The ACT government has also confirmed the precinct's ageing and contaminated buildings would be demolished before the site is handed over, a move which will force the academy to redevelop the site effectively from scratch.

The project is now estimated to cost up to $200 million.

The land will be sold to the academy at market value.

The campus, expected to be built in 10 stages across the next two decades, would include new workshops, teaching and administration facilities, student accommodation and an on-site "business incubator".

The campus could accommodate more than 2000 students, employ in excess of 220 staff and inject some $276 million into the local economy by 2040, according to government estimates of the development's potential.

Academy of Interactive Entertainment founder John De Margheriti said the the company's growth in Canberra had been "stifled" amid the drawn-out process to secure government support for the Watson redevelopment.

But with an agreement now struck, Mr De Margheriti said the future of the Canberra academy, which remains the company's global headquarters, was bright.

"Canberra is special and we want to leave something behind, build something that will leave a legacy," he said.

"We want this to be the Harvard or Stanford of gaming - a really world-class, boutique campus."

Mr De Margheriti expected to start another round of public consultation on the academy's plan before the end of 2020, and was hopeful the land sale would be approved early next year.

The Barr government has been reluctant to consider, let alone support, unsolicited bids to redevelop public land in the wake of controversial Manuka oval and Canberra casino upgrade proposals.

But the government has strongly endorsed AIE's plan, which it believes will help create jobs during Canberra's COVID-19 recovery and further cement Canberra as the "knowledge capital".