The sale of the incomplete WestConnex motorway will fund upgrades at a southwest Sydney hospital if Labor wins the next state election.
A new community mental health ward would make up some of at least 120 beds added to Canterbury Hospital, along with expanded maternity and palliative care facilities.
The $225 million in funding is a "first tranche", Labor health spokesman Ryan Park said on Monday.
"But it will go an enormous way to getting the additional services and infrastructure that they need," Mr Park said.
"Canterbury, going forward is always going to need additional funds because of the growth in southwestern Sydney and the population it serves."
The hospital has no renal dialysis and maternity beds are shared four-bed wards no longer considered sound clinical practice, the opposition says.
Money from the $5 billion WestInvest fund, created by selling WestConnex and designed to pay for public infrastructure in western Sydney, will go to the hospital, Opposition leader Chris Minns said.
He said the government had set $2.5 billion aside "for discretionary spending by ... senior ministers".
"But we need to make sure that money is committed to much-needed infrastructure," Mr Minns told reporters outside Canterbury Hospital on Monday.
The upgrade would be the most significant since the hospital was built in 1936 and the first since the 1990s, he said.
Outpatient services will include expanded cardiovascular services, diabetes management, endocrinology, respiratory and cardiology, Labor says.
The WestInvest funds come from "asset recycling" - the sale of public infrastructure to private hands.
While Mr Minns has vowed to end the process, he defended his use of WestConnex funds.
"We can't pretend that transaction didn't take place, that funding is available," he said.
Premier Dominic Perrottet criticised Labor's stance.
"No asset recycling - what does that mean? There is no money to build the things that matter to people's lives," the premier said on Monday.
Retiring Health Minister Brad Hazzard in October told parliament he would like Canterbury Hospital upgraded but other areas had been prioritised.
"(It's) the next one off the starting block," Mr Hazzard said.
Mr Minns said refusals to meet with health staff "would lead many to the conclusion that it's been a political decision not to fund much-needed pieces of infrastructure".
He said the government should match Labor's proposal.
Canterbury-Bankstown's population grew 24.2 per cent between 2006 and 2021, a period when two councils also merged, and is projected to grow 41 per cent over the next 15 years.
Mr Minns said it is "a population boom that has never been seen in this part of NSW", but further west in Blacktown, the population grew 46 per cent from 2006 to 2021.
It is now the most populous local government area outside Queensland, where local governments serve larger areas.
In the 20 years up to 2021, its population grew at a rate more than double Canterbury-Bankstown's, according to Australian Bureau of Statistics data.
The government recently spent $700 million expanding Mount Druitt and Blacktown Hospitals.