The $270 million Northern Regional Prison will be built two kilometres north of Westbury.
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Corrections Minister Elise Archer will announce the location for the 270-bed, maximum security Northern prison on Monday.
An aerial view of the prison site shows it alongside Birralee Road, several hundred metres north of the town's industrial estate.
Ms Archer has promised "extensive consultation with the local community" after today's announcement of the preferred site.
"The preferred site was selected following a targeted Expression of Interest process and took into account land suitability, proximity to population centres in the North and North-West region, access to transport links and access to services such as water, gas and electricity," Ms Archer said.
"For a prison to be built on this site we will need to follow standard planning processes, which will include a full and thorough public consultation.
"The government is committed to an open and transparent community consultation process to alleviate any concerns raised by the local community and to explain the many positives the development of the Northern Regional Prison will bring to the region."
Ms Archer said the Northern prison would be the "most secure" facility in Tasmania, including "high security" measures.
The Northern Regional Prison is expected to employ more than 250 people when it is fully up and running in 10 years.
Ms Archer said as well as providing a jobs boost in the construction phase, the completed project would also mean prisoners from the North and North-West could be closer to their families.
"Approximately 46 per cent of prisoners originate from the North or North-West of Tasmania or are required to appear in Northern or North-Western courts, providing much reason for this major infrastructure project," she said recently.
The Northern prison was a key election commitment of the government in 2018 and part of the government's $350 million prison infrastructure program.
"While we make no apology for being tough on serious crime, we want offenders to rehabilitate and get their lives back on track, becoming productive, law-abiding members of society who no longer pose a threat to the community," she said.
Stage one of the prison to house 140 prisoners is due to be completed in the next five years, with full completion in 10 years. There were 10 applicants for the new Northern Prison which will be the second in the state.
It will relieve pressure on Risdon Prison.
Recent data showed that Tasmanian prisoner numbers continued to grow.
The state averaged 673 people in full-time custody per day in the June quarter, according to the Australian Bureau of Statistics.
That was an increase of 13 compared to the March quarter and a 21 per cent increase on the average of 555 for calendar year 2016.