New South Wales has finally thrown a lifeline to grief-stricken families caught up in the Mr Fluffy asbestos crisis, ending decades of uncertainty.

The State Government will set aside as much as $250 million for a voluntary home buyback scheme that could ultimately see more than 500 houses demolished in places like Queanbeyan, Yass, Bungendore, Lithgow and even Manly.

Houses in several parts of NSW and Canberra were pumped full of potentially deadly loose-fill asbestos roof insulation in the 1960s and 1970s by a company that became known as Mr Fluffy.

But while more than 1,000 homes in the ACT were cleaned in the late 1980s and early 1990s and are now part of a $1 billion demolition program, residents across the border had received little to no help until recently.

Authorities still do not know how many Mr Fluffy homes are in NSW. Only 66 have been found in the state, most in Queanbeyan.

But according to a study commissioned by the Government, it is possible as many as 511 properties across 26 local council areas may have had the substance installed.

The voluntary buyback scheme, which will be officially launched in Queanbeyan today, offers greater flexibility than the Mr Fluffy buyback program currently operating in the ACT.

Crucially, home owners will be able to keep their blocks.

They will be given the option of selling their house and land at market value to the Government, or just selling the house — an option people living on farms are more likely to take up.

"This package will provide safety, certainty and support for our citizens and an enduring solution", NSW Finance Minister Dominic Perrottet said in a statement.

As part of the scheme, a taskforce will be set up to carry out the program; a public register of Mr Fluffy homes will be drawn up; warning statements might be put on house contracts; free asbestos testing across large parts of the state will continue; and there will be mandatory labels on contaminated buildings to protect tradespeople.

Residents have until the start of August next year to register.

Those that do not participate in the program will have to shoulder the large cost of future demolition or repairs, and the value of contaminated properties is likely to be significantly reduced.

Queanbeyan Mayor Tim Overall said one of the big issues for NSW was complications over Mr Fluffy asbestos-insulated apartments.

"Of the 56 homes, there's one block of 38 apartments," he said.

"The State Government will purchase unit by unit, when that owner makes it available for purchase, until the NSW Government owns all of those properties.

"It will then demolish the whole block of units, remediate the land and put that back on the market."

Major milestone in ending Mr Fluffy's legacy

Today's announcement marks a major turnaround for Mr Fluffy homeowners in NSW.

Until recently, they were largely ignored by the state.

In the 1980s, when the Commonwealth was using state-of-the-art equipment to clean up homes in Canberra, councils in NSW were sending caution letters.

Last year, when the ACT announced it was embarking on a $1 billion demolition scheme, NSW was asking residents to make sure the substance was not falling out of cracks in their ceiling.

But the Coalition Government began investigating the problem in the lead-up to the state election, following a concerted campaign by home owners from Canberra and Queanbeyan in the key battleground seat of Monaro.

Monaro MP John Barilaro said the announcement by the NSW Government ended "three decades of uncertainty for NSW homeowners and land holders".

"It brings relief that there is light at the end of the tunnel for many that have endured the financial burden and the emotional strain on family and friends," he said.

"We've reacted and learned from what's happening across the border in the ACT and most importantly we're putting the residents of this state first and foremost of the decision-making."

Some asbestos experts have described the Mr Fluffy product as one of the most hazardous building materials ever made.

It looks like fluff or dust, is capable of falling through tiny gaps and is impossible to remove once installed.

In Canberra, it was found on pillows and babies' cots in houses that were thought to be clean.

At least two people in the ACT have claimed the Mr Fluffy product gave them mesothelioma, a rare and often fatal cancer that is almost always caused by exposure to asbestos.

But given mesothelioma can take decades to develop, many families who own contaminated homes are worried about the long-term health impact.

In Canberra, it is estimated as many as 30,000 people have lived in a Mr Fluffy home over the past 40 or so years.

This Wednesday, the territory Government will release the addresses of the more than 1,000 affected houses across the city.

Several politicians have likened the ongoing crisis to a major natural disaster because it has forced thousands of people from their homes and put an enormous emotional strain on many families.