The Newcastle West nightclub will close its doors following Saturday's New Year's Eve party for five months while it undergoes a revamp and expansion.

A 600-capacity mezzanine room will be built next door to the existing venue at 13 Steel Street to cater for touring Australian and international acts. The third level of the existing King Street Hotel building will be used for smaller gigs typically held in the Cambridge's warehouse room.

The plan will be welcome news for Newcastle music punters who feared the city could drop off touring schedules for major acts when the nearby Cambridge Hotel closes after June 25 to be redeveloped into a 19-storey student accommodation building by French-owned company Linkcity.

Cambridge and King Street Hotels co-owner Greg Mathew said the new expanded venue should be open in early June.

"I don't think it'll be what the Cambridge is, because it's such an institution, but we're mindful of every aspect of what the Cambridge is and we've got an opportunity to build a room that will be state-of-the-art with all the best PA and screens," Mathew said. "We've got the time to build a room that will complement the artists."

King Street Hotel has operated as Newcastle's biggest nightclub for 20 years and Mathew said it was time it was refitted to become a fresher and more inviting venue.

"It deserves a break," he said. "In order for us to get it ready for what we want it to become it needs some time off. To transform it into something like that, it's hard to do whilst your open."

Newcastle hotelier and long-time King Street licensee Russell Richardson bought the Steel Street property for $325,000 in February 2019. The site previously housed a Domino's pizza outlet and an upstairs brothel.

In May 2021 City of Newcastle approved a development application to expand King Street's capacity from 780 to 1300 patrons.