The NSW state government will adopt a trial period of extending bottle shop closing hours and lockout times in Kings Cross and the Sydney CBD, following controversy over the legislation.

The government today announced they would adopt recommendations set out in the Callinan Review, which included more than 1800 submissions including the idea that Sydney’s lockout laws could be “relaxed”.

The two-year trial period will extend closing hours from 3.00am to 3.30am, and lockout times extended from 1.30am to 2.00am, provided venues offer live entertainment, live performances or art and cultural events including bands and DJs.

Demonstrators holding up protest signs on Oxford Street in Sydney in October. (AAP)

The state-wide ban on the sale of takeaway alcohol will be shifted one hour forward to 11pm.

The report was handed to the government in September by former High Court Judge Ian Callinan who recommended the proposed time shifts.

He did warn any relaxation “carries the risk of greater density and consumption of more alcohol” in Kings Cross and the CBD.

"Mr Callinan found that the lockout laws introduced in February have resulted in 'much safer, quieter and cleaner areas'," NSW premier Mike Baird said.

“We want this to be dynamic. If we see an uptick in violence, we will revert back to where we were… We want to ensure we continue to listen.”

Other measures announced include extending the liquor licence freeze in the CBD and Kings Cross until June 1, 2018, increasing small bar patron capacity from 60 to 100, and providing automatic extended trading to 2am for small bars in the CBD.

The government says increasing the patronage limit “will help improve the commercial viability” of small bars.

NSW Premier Mike Baird. (AAP)

Mr Baird said there had been “strong views” that the lockout laws impacted live music and the “city’s vibrancy”.

The laws were originally introduced after a spate of one-punch assaults in the CBD, but have sparked controversy from musicians, punters and business traders.

Changes to lockouts, takeaway sales, and small bars will commence in January.

Mr Baird said statistics on violence and other measures would be reviewed annually to garner whether changes need to be made.