The plant is located in the Kurnell industrial estate, in Southern Sydney in the Australian state of New South Wales.

[11] In response to these problems, the NSW Government's 2006 Metropolitan Water Plan[11] identified desalination as a way of securing Sydney's water supply needs in the case of a severe, prolonged drought:[12] Given its total independence of rainfall, desalination can be used to secure supplies in the event of extreme drought.

Following detailed investigations, the NSW Government has identified a preferred technology (reverse osmosis), purchased a site, sought planning approval and undertaken substantial preparatory works so that it can build a desalination plant if required.

Having the capacity to draw on desalination means that the Government will not need to impose drought restrictions on water use that are more stringent than those imposed when dams levels reached 40% in June 2005.On 16 October 2006 the NSW Minister for Planning Frank Sartor signed the approval for Sydney Water to proceed with the construction of the Kurnell Desalination Plant.

The Blue Water Joint Venture comprised the plant constructor, John Holland Group, and the operator, Veolia Water Australia Pty Ltd.[14] The total approved budget of the project was $1.896 billion and it was delivered on time and in excess of an estimated $60 million under this budget at the completion of construction.

The plant was refinanced with a book value in excess of $2 billion in early 2012, providing a profit to the government at transaction close.

[24] Both the tunnels to the sea and the pipeline to the water supply have been built to the capacity of 500 ML per day, so if the plant is ever expanded, the supporting infrastructure is already in place.

The NSW Minister for Finance and Services Greg Pearce directed the Sydney Desalination Plant to reduce supply to about 90 million litres a day.

When the dam storage level reached 90% capacity, the Minister directed the Sydney Desalination Plant to cease production on 2 July 2012.

[30] On 10 August 2019 it was announced that, two months ahead of schedule, the plant had reached the full production of 250 million litres per day, 15 per cent of Sydney's supply.

[31] On 9 January 2020, the NSW Government announced plans to double the size of the plant to produce 500 ML per day.

[37] Water quality concerns regarding the proximity of the seawater inlet to the desalination plant to the nearby sewage ocean outfall.

[38] Environmental economists from the Australian National University studied the project after its completion and determined that "it was a costly decision that did not need to be made while dam levels were high.