For the past 12 years, electronic gaming machines in the state's pubs, clubs and casinos were restricted to accept nothing larger than $20 bills.
Attorney-General Jarrod Bleijie has approved a change to allow $50 and $100 notes.
The move, lobbied by major casino owner Echo Entertainment, was condemned by charities and counselling services, which say it will have a negative effect on problem gamblers.
Mr Newman told reporters the change would not affect problem gamblers.
"This is a change about the notes you can use - no changes to the limit," he said.
"There's a $100 limit, which puts a real lid in terms of problem gamblers."
Mr Newman says the limit in NSW is $10,000.
"We've got some tight controls here and we haven't slackened them off."
The lifting of the ban on $50 and $100 notes was among recommendations by a government-appointed expert panel that reviewed the state's gambling laws and policies.
Controversial proposals being considered include doubling the maximum of each poker machine bet to $10 and allowing gaming at pubs and clubs before 10am.
The government is expected to release its full response next year.
