The $1.8 million stage of works is to the south of the Toronto Amateur Sailing Club and includes the removal of the existing rotunda, construction of a new pavilion and public square, and landscaping.

The works are expected to proceed into 2022 but the council plans to keep a narrow waterfront section of land and a shared path which runs through the area open to the public over summer.

Lake Macquarie mayor Kay Fraser, who turned the first sod on the initial works on Wednesday, said it was pleasing to see the project begin after a drawn-out planning process.

"We've consulted extensively with the community to arrive at this point, and I am excited to see the first stage of works get underway," she said.

"Once complete, the renewal of Toronto's foreshore will stimulate local business activity, connect our community and promote healthy, active lifestyles."

The council was initially planning the foreshore revamp separate to a development it had planned for land on Bath Street at the foreshore's northern end.

Community opposition to the now dumped plan for a multi-storey development ultimately resulted in the two projects being brought together and the council scaling back its proposal for Bath Street to a ground-level commercial building.

The council's manager community assets Brendan Callander said the foreshore overhaul's next stages were still being planned but construction was expected to begin in the next financial year.

"We've developed the foreshore master plan in consultation with the local community, who have had opportunities throughout the process to provide input and feedback," he said.

"Once all stages are complete, Toronto's foreshore will include new boardwalk connections, extended shared pathways, a revamped playground and cafe area, bike hubs, lookouts, shade pavilions and barbecue facilities. We're in the detailed design phase for these future stages."

The stage-one works site is adjacent to the unnetted swimming area which some councillors have suggested should be enclosed similar to the Belmont Baths.

Cr Fraser agreed the swimming area was worthy of an upgrade but that had not been considered as part of the foreshore upgrade.

"The western side of the lake deserve the same sort of facility so we're investigating that now," she said.

"I'd be really happy to see Toronto baths reinstated and an area for all people to use, whether it's families or kids or older people.

"But that would be a separate project."

The council exhibited a draft Lake Activation Strategy earlier this year which proposed investigating additional enclosed swimming baths in Lake Macquarie.

The document is expected to return to the elected council for endorsement before the end of the year.