Uber is officially legal in NSW, with the Baird government giving the ride sharing service the go ahead in cabinet at a cost.

Premier Mike Baird's cabinet today agreed to legalise the service immediately, as well as establish a compensation plan for taxi owners, who expect to see a significant drop in revenue.

New legislation will see the creation of a $250 million Industry Assistance Package, with perpetual plate owners given $20,000 for each plate they own, capped at two plates.

A compensation fund will be distributed on a case-by-case basis for plate owners who only recently entered the industry.

Passengers will pay a $1 levy for every trip in a taxi, Uber or hire car, to help cover the IAP.

Under the plan, initially floated last month, traditional cabs will still have the exclusive right to pick up passengers from taxi ranks and off the streets. Taxis will still have exclusive access to Sydney Airport.

Uber drivers will now have to pay a $45 accreditation fee and undergo criminal background checks. They will also have to pay business registration on their car as well as CTP insurance.

The NSW government argues the change will throw open the booking market for other companies to take a share and put downward pressure on fares.

The NRMA told 9NEWS it is considering a proposal to run their own Uber-style service.