The closure of a long-standing petrol station at Sutherland is expected to pave the way for a new commercial and or residential development of up to 12-13 storeys.
The United Service Station at 1-3 Oxford Street, which is opposite the train line and next to the Sydney Water reservoir, closed this month.
The "servo" had traded for decades under various brand names.
A Sutherland Shire Council spokeswoman said the site was contaminated with petroleum hydrocarbons and an active Voluntary Remediation Plan, approved by the NSW Environment Protection Authority, was in place.
"Council anticipates the owner of the site will soon submit a development application for approval to remediate the property, which council will review accordingly," she said.
"The site sits within the B3 Commercial Core zone, which permits commercial and residential development with a building height of up to 40 metres
"An application has not been lodged for the future development of the site at this time."
The council website says the types of uses permissible in the zone include commercial premises, including offices and shops, residential flat buildings and food and drink premises.
The council has been monitoring the site for at least 12 years.
A staff report to a 2018 council meeting said, "Council's involvement in the site dates back to June 2008 when council commenced investigation into potential contamination issues on the adjoining Sydney Water site".
The report said both sites were on the council's Contaminated Lands Information Register.
"Council intends to maintain involvement in this issue until it is resolved," the report said.