A lack of rail connection to the CBD had been a major criticism of the much-delayed second airport.

The cost of the north-south rail link has been estimated to be as high as $7-billion.

The state and federal governments will only jointly fund a $100-million business case to investigate possible station sites for the new rail link from St Marys to the airport site at Badgerys Creek, 50 kilometres west of the CBD.

The governments will also investigate extending the rail to Leppington, a newly gazetted suburb earmarked for major future population growth by the state government.

But in a joint statement the federal shadow infrastructure minister, Anthony Albanese, and state Opposition Leader Luke Foley criticised the plans for not including provisions to link the Macarthur region to the airport and for an extension to Rouse Hill in the north-west.

But the Prime Minister, NSW Premier and eight western Sydney mayors styled Sunday's announcement as a "city deal" that includes the rail line but also manufacturing and education centres, and streamlined planning processes and a dedicated centre to attract investment to the region.

Ms Berejiklian said the deal was a nationally significant announcement: "This is about putting western Sydney on the map globally. We open a new chapter here".

But the Premier's office declined to say how the new rail line would be funded beyond saying the government had proven it delivered on its committments.

"The business case will determine the route, station locations and final cost," Ms Berejiklian's office said, while refusing to specify delivery dates for the project and how it would be structured including whether it will involve partnership with the private sector.

It has recently been reported the government has been riven by internal conflict about whether to prioritise another major rail project, the Metro West line, a multibillion-dollar link between Parramatta and the CBD.

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David Borger from the Western Sydney Business Chamber urged the government to not let the new project come at the expense of the Metro West Line.

"[Both are] needed if we are to truly create the 30-minute city and deal with the massive overcrowding on the Western line," he said.

The Premier's office did not say if the Western Sydney Metro project would conflict with Sunday's announcement.

The "city deal" package also includes a $150 million liveability program, funded jointly by the Commonwealth, state government and councils, which will deliver new parkland and community facilities and investment in 5G data technology and other technology infrastructure for the region.

The as-yet-to-be built Western Sydney airport around which the new deal is built will add about 200,000 new jobs to the area, the federal government says.

Mr Foley said he welcomed the announcement but said that it was too late after the government had already committed to major infrastructure investments on the northern beaches and its $2.5-billion stadia redevelopment plan.

"It should have happened a long time ago. I want them to get on with it," he said.

"Labor will deliver a rail link much faster because we won't be splurging $2.5 billion [on] stadiums. Fast-track your time-table for delivery [by dropping] your stadiums."

But the announcement was widely welcomed by business and industry groups.

“To arrive at a deal is no easy feat and today’s announcement demonstrates a fair dinkum commitment which, if implemented well, will improve transport, liveability, housing supply and long-term collaboration across Western Sydney,” NSW executive director of the Property Council Jane Fitzgerald said