Trams will run between the eastern suburbs and the city by crossing Moore Park in a tunnel, the state government has determined as part of its $1.6 billion expansion of Sydney's tram network.

Transport for NSW has ruled out its other idea for the Moore Park crossing - a cheaper raised viaduct - and will put the tunnel option on display along with other project details in a draft environmental impact statement released to the public next week.

The statement will include information about how to manage the massive traffic changes slated for the city and Randwick and Kingsford in the eastern suburbs.

''As with any project, there are winners and losers,'' the project director for the light rail line, Jeff Goodling, said. ''As traffic changes, we will find that some intersections don't work as well as they do now; we will find most intersections work better.''

But Mr Goodling said the biggest challenge would be during construction. The tram line will run from Circular Quay to Central, through Surry Hills on Devonshire Street, under Moore Park, to Randwick and Kingsford on Alison Road and Anzac Parade.