The state government will announce funding to unclog the entrance to the Myall River on Wednesday.
Water Minister Melinda Pavey will confirm that the government will provide $845,000 towards the project. Mid-Coast Council will match the funding.
The 'short cut' channel was last dredged in 2015 following an eight-year community campaign.
The $3.5 million project resulted in an immediate improvement in the river's water quality and the surrounding environment.
However sand from Port Stephens has been causing the channel to silt up over the past two years. Ferry operators have advised sections of the channel near Corrie Island were noticeably shallower than 12 months ago.
Myall River Action Group spokesman Gordon Grainger said the funding announcement had arrived just in time.
"We have had reports of dolphin stranding, recreational boats unable to use the entrance and the depletion of sand on the stockpile," he said.
"This community depends on the Myall River and Lakes, for its tourism and lifestyle and natural oceanic water is the life blood. That water can only come from the natural, eastern facing entrance."
He said the group would be seeking federal funding to complete the dredging project, which incorporates the Ramsar-listed Corrie Island.
The group is also hopeful of reaching agreement on a long-term strategy for dredging the channel, similar to the system for dredging Swansea channel on an ongoing basis.
The dredging project is also need to build up the sand stockpile used by the Jimmys Beach sand transfer system.
The $4.1 million project pumps sand via a two kilometre pipeline to 10 outlets on Jimmys Beach and Winda Woppa.
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