NSW Energy Minister Matt Kean announced the plan, describing REZs as "modern day power stations which bring together low-cost solar and wind generation with transmission and storage to produce cheap, clean and reliable electricity".
The REZ will help drought-proof traditional farming communities, as well as provide new income streams for rural landholders that host electricity infrastructure, he said.
"NSW is driving the nation's action on climate change, by securing our economic and environmental prosperity for decades to come," Mr Kean said on Thursday.
The announcement comes on the back of the NSW government's commitment in September to cut greenhouse gas emissions by 50 per cent on 2005 levels by 2030, on its way to a 2050 net-zero target.
The REZ would provide at least 3000 megawatts of cheap, reliable electricity, enough to power 1.4 million homes and drive $5.2 billion in private investment into the Central West by 2030, supporting around 3900 construction jobs, Mr Kean said.
"In NSW, we not only have targets and plans, we also have nation-leading legislation that will deliver on our commitment to halve emissions by 2030 and achieve net zero by 2050."
Dubbo MP Dugald Saunders said the REZ would provide jobs, investment and economic benefits for generations to come,.
"We have spent a long time consulting and working with local communities to make sure this infrastructure is built where our local community wants it, and I will continue to represent community interests."
The Energy Corporation of NSW will be appointed as the infrastructure planner and will co-ordinate the transmission, generation, firming and storage projects.
As Infrastructure Planner, EnergyCo NSW will assess and recommend REZ network infrastructure projects that best suit each community's needs.
Central-West Orana REZ includes the areas of: Dubbo, Narromine, Wellington, Dunedoo, Gulgong, Mudgee, Cassilis, Coolah, Mendooran, Mumbil, Eumungerie and Gilgrandra.
