The federal government is expected to announce today that the university has won a $30 million Education Investment Fund grant to redevelop and extend the labs.

The project will create 260 jobs during construction and house more than 300 scientists.

Newcastle MP Sharon Grierson said the institute would rival the Hunter Medical Research Institute.

To be called the Newcastle Institute for Energy and Resources, it will bring together scientists to work on sustainable energy research ranging from clean coal to green energies.

The project, more than three years in the making, will be a joint project of the science and engineering faculties.

It will be unmatched by any other university in the country.

The 15,000 square metre building includes five industrial pilot plant workshops and will be redeveloped to include the latest technology.

University of Newcastle Vice-Chancellor Nick Saunders said the institute would draw researchers and companies from around Australia and the world.

"What we have found is by having a special research centre with scientists working together we have seen a terrific multiplication of opportunity and productivity," Professor said.

"This is going the next step."

The university is understood to have put up $10 million to buy the former BHP Billiton Newcastle Technology Centre.

The state government will contribute $2.2 million.

The institute could open as early as the end of 2012.

The BHP lab was opened in 1956 and was one of the first industrial research labs in Australia.

It became a centre for research and pioneered many new industrial techniques.

The university will join with the University of NSW, University of Wollongong and CSIRO on the project.