A Sydney council has approved a plan to create a refugee resettlement hub in the city's inner west at the site of a former mental hospital.

Leichhardt Council voted in favour of requesting funding from the state and federal government for a refugee hub at Callan Park, Rozelle, where some buildings have stood unused for years.

The 60-acre site was used as a psychiatric hospital from the mid-19th century up until 1994.

The funding would be used to refit the buildings for short-term accommodation and the provision of support services for some of the 7,000 Syrian refugees due to be resettled in New South Wales next year.

Leichhardt Mayor Darcy Byrne said a permanent mental health service for the wider community would also be established with the funding.

"Council will now be making clear to the Federal Government that we not only support humanitarianism in principle – that we will welcome refugees in our own backyard," Cr Byrne said.

"This won't cost local ratepayers a single dollar but it is in fact an opportunity to attract state and federal funding to rehabilitate buildings in Callan Park for refugees and for the broader community."

At a previous meeting discussing the motion on November 24, far-right protesters from the Party for Freedom stormed the council chambers with signs arguing against allowing refugees into the inner west.

"By adopting a position that we will seek to have short-term accommodation for refugees in Callan Park, we've sent a clear message that those people are welcome here and that the lunar right of Australian politics are not," Cr Byrne said of the disturbance.

Callan Park was previously home to Rozelle Hospital and currently houses the Sydney College of the Arts.