The project at the Summerhill Waste Management Centre by Barpa Pty Ltd will divert about 900,000 tonnes of food and garden organics from landfill over 25 years.

It is estimated the project will save ratepayers $24 million in operational costs and $32.5 million in (Section 88) state government levies.

"With food and garden organics accounting for around 30 per cent of waste streams, we are embarking on the largest waste commitment ever made by the City of Newcastle - to divert almost a million tonnes of organic material from landfill," Lord Mayor Nuatali Nelmes said on Tuesday.

"When properly processed into compost, recycled organics can be sold as fertiliser that improves soil quality and productivity, displacing artificial chemical-based fertilisers on crops, sporting fields and in public and household gardens."

It is proposed onsite recycling of garden organics will begin at the Summerhill waste centre in a fully enclosed facility in 2022 before food organics are added four years later, following community consultation.

Initially diverting around 20,000 tonnes of garden organics from landfill each year, the facility will grow in capacity to process around 50,000 tonnes annually.

"We intend to start processing food organics in 2026 following extensive planning and community engagement," the Lord Mayor said.

"In the meantime, work is continuing on the development of a program to roll out subsidised worm farms and community compost bins across the city."

Barpa Pty Ltd' proposal for a fully enclosed recycling facility, which will be the first of its kind in the Hunter, was recommended in favour of three rival bids.

Manager of the city's waste services Troy Uren said higher regulatory standards loomed large over such traditional waste practices.

"Garden organics are currently trucked from Summerhill to a Ravensworth site that can't process food organics, and at significant cost to the ratepayer in what was only ever intended to be a temporary solution," Mr Uren said.