The former Berrima Correctional Centre has been listed for sale via an expressions of interest campaign.
Member for Goulburn Wendy Tuckerman said the jail in the NSW Southern Highlands was retired last year as it was no longer fit-for-purpose and surplus to Corrective Services' requirements.
"This unused State heritage-listed site has great potential to deliver social, economic and environmental outcomes for the community," Mrs Tuckerman said.
"This is a rare opportunity to express an interest in a 1.9-hectare site that's rich in history, stories and heritage charm in the heart of the bustling township of Berrima."
"This is the first step in understanding the interest in and potential for the site.
"I look forward to seeing what is received. The Berrima Correctional Centre opened in 1839 and has since had many uses including being a German prisoner camp during World War I, a training centre and a male minimum-security prison that was later converted to house women."
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Located close to cafes, parks, rivers and Australia's oldest continually licensed Inn, the property has two historic cottages, a tennis court, industrial shed and commercial kitchen, in addition to the jail's 60 cells, watch tower, guard offices and commercial space.
Minister for Water, Property and Housing Melinda Pavey said she was delighted that part of the site will be used for public space and the heritage buildings preserved and adaptively reused.
"The jail will remain a historic centrepiece for Berrima attracting tourism and growth for the whole region," Mrs Pavey said.
The EOI campaign is being managed by Colliers. Responses will be assessed and evaluated and short-listed respondents may be required to respond to a request for tender.