The NSW government has unveiled plans for a significant redesign of Blackwattle Bay, shifting the Sydney Fish Market to a new home, displacing heavy industry and opening new tracts of inner-city homes and shops.

The $250 million transformation, announced on Sunday by Premier Gladys Berejiklian, would house the fish market in a new Danish-designed building next to its current spot, backing onto Wentworth Park on the south side of the bay.

Ms Berejiklian said she hoped new use of the current site would pay for its redevelopment, costing taxpayers nothing.

But the proposal comes after a $549 million cost blowout to the Sydney light-rail construction, while plans to combat extra congestion from the new homes and shops remain under development.