NSW will be home to Australia's first 'terrorists only' jail, a concept brought to fruition to stop terrorists radicalising other prisoners.
To be built next to Supermax Jail in Goulburn, the jail will feature sound proof cells, a deradicalisation program and a new counter terrorism team.
The high-tech maximum security prison will cost $47 million and house 54 segregated inmates.
Prisons Minister David Elliott said the war on terror is far from over.
"We have all too many terorirsts in Supermax Jail in Goublurn as we speak - the war against terror has another decade or two to go," he said.
Supermax 2 will be built over three years within the Goublurn Jail complex.
The capacity at the original Supermax will be extended from 45 to 75.
"We need extra capacity to isolate those prisoners who are likely to spread radicalisation through the prison network," Premier Gladys Berejiklian said.
Corrective Services Commissioner Peter Severin said this will help make it more difficult for terrorists to "communicate in ways we can't control".
"It will be a very controlled environment, very secure," he said.
Currently, jails accommodate 33 convicted or accused terrorists plus another 12 with extremist views, five of whom were radicalised in prison.
Authrorities deny criticism that housing them all together will only allow their twisted ideologies to fester.
Minister for Immigration, Peter Dutton, said "we don't want those people coming out a bigger threat than when they went into jail".
A counter terrorism team will also be based at Silverwater, liaising with our intelligence agencies.