Parts of the Powerhouse Museum could remain open in the inner city of Sydney, with the NSW government hinting it might back down on plans to completely relocate the facility.
Arts Minister Don Harwin says the museum's move to Parramatta in Sydney's west is still a "done deal" but he's open to retaining a small portion at the Pyrmont site.
"One of the things I've said to the people overseeing the project is, 'Look if you can find a way of using the Ultimo site as some sort of cultural space, and if the state can afford it ... we'll listen to it'," Mr Harwin told ABC Radio on Thursday.
The government will soon commence more public consultation on the relocation - which could cost up to $1 billion - with a final business case to be released later this year.
Opposition leader Luke Foley has criticised the announcement, describing it as a "stab in the back" to the people of western Sydney.
"During the last election Mike Baird promised to move the Powerhouse Museum entirely to Parramatta because Western Sydney deserved 'one of our great cultural institutions'," Mr Foley said.
"Now that he's gone, Ms Berejiklian and Mr Harwin are prepared to trash that promise."
The head of the Sydney Business Chamber, Western Sydney, David Borger said he was equally disappointed.
"We are relieved to hear the mothership of the Museum of Applied Arts and Sciences will be located in Parramatta and will be a significant cultural boost to the area," Mr Borger said in a statement.
"The details of the Parramatta Powerhouse are still sketchy, but we realise this can be a great opportunity to start from scratch and build something the entire community can be proud of".
The new museum will be the flagship campus for the Museum of Applied Arts and Sciences, which also has sites at Castle Hill and Millers Point.
