The project, which has now been formally approved by the ACT government, will cost between $250 to $300 million and will use the community's preferred design option of shorter buildings spread over a larger footprint rather than one very tall building.

Construction will begin next year, initially on the public transport interchange with construction of the CIT campus commencing in 2022.

The government has also announced the location of the Woden light rail stop with it to be located next to the Callam Street campus. The project will include the construction of an adjoining new bus interchange.

Accommodation for young people experiencing, or at risk of, homelessness will be incorporated in the new campus, to provide housing, mentoring and support for students aged 16 to 24.

The youth foyer would include independent living bedroom units and indoor and outdoor communal spaces on campus.

Tertiary Education Minister Chris Steel said the project would create up to 520 new jobs in the construction phase, and more in the employment of teaching and other staff when the campus opened.

Work will begin on the new public transport interchange next year, with the addition of a light rail stop in preparation for its expansion and seven more bus stops to meet increasing demand.

It is expected to be completed by 2022.

"Better public transport is a key part of the project, with the construction of a new, safer interchange on Callam Street for buses and we'll build Woden Station now ready for light rail to arrive," Mr Steel said.

"This project will create a new front door to Woden, with a well-lit pedestrian boulevard connecting the interchange, CIT campus, the square and Westfield for a more vibrant and welcoming town centre."

The new precinct will effectively replace CIT's Reid facility which will be redeveloped into a University of New South Wales campus over the next 15 years, with a $1 billion price tag.

The Woden development, first announced in November last year, was part of the ACT government's COVID-19 recovery plan, Mr Steel said.

"This is a $250 to $300 million investment in jobs and Woden's regeneration. This project is about building jobs in Woden today, to support thousands of students into the jobs of the future," he said.

Prime Minister Scott Morrison last week singled out the ACT for not spending enough on infrastructure to assist post-coronavirus recovery. This prompted Chief Minister Andrew Barr to commit to a "very ambitious" stimulus program of more than $1 billion in public works of which the Woden CIT is included.

A survey of 400 community members in June found spreading the buildings across the site at a maximum of 12-storeys high, was the favoured choice by almost half of respondents.

Designs will be finalised in the next planning stages but the initial concept shows a tree-lined building stretching the length of the block along Bradley and Callam Streets.

The ACT government has said the CIT Reid campus would remain operational until the Woden precinct was complete.