The National Art School, Australia's oldest of its kind, has just secured a long-term lease over the historic Darlinghurst Gaol, guaranteeing its future and ending years of uncertainty around its tenure.

The signing of the 45-year lease took place on site on Monday in the presence of the school's chair, four board members and Minister for Arts Don Harwin. The institution is now recognised as an organisation of state significance, alongside Carriageworks and the Museum of Contemporary Art.

Such institutions typically have multi-year funding agreements with the government, so the boutique school no longer needs to go cap in hand to beg for annual budget funding.

The move comes several weeks after the NSW Auditor-General identified the school to be at "extreme risk" because of delays to the occupancy agreement for its inner-city campus.