The NSW government on Monday announced it would direct $130.7 million to building 22 treatment spaces this financial year.
The state's public hospitals have noted more than 500,000 emergency short-stay admissions since the beginning of 2024.
Hospitals treat and observe patients who require care past their initial emergency room assessment in short-stay units.
Campbelltown, Nepean, Maitland, John Hunter, St George and Wyong hospitals will receive the additional spaces.
A further eight spaces will be built over the 2027/28 financial year.
Health Services Union NSW Secretary Gerard Hayes welcomed the investment as absolutely essential to smooth functioning.
"This investment is critical, as is a broader range of measures aimed at expanding scope of practice to empower more of the health workforce to use more of their skills so we can keep patients moving through the hospital system," he told AAP.
Premier Chris Minns said the additional units would alleviate stress from emergency departments under constant and sustained pressure, regardless of the time of the year.
"At hospitals which already have a short stay unit in the ED we're seeing patients with semi-urgent conditions treated and back home quicker without needing to be admitted to a traditional ward in most cases," he said.
Health Minister Ryan Park said short stay units helped enhance ED capacity, streamline patient flow, and improve patient experience.
Earlier in August, Mr Minns asked patients to avoid the emergency room after a record day of winter presentations.
Nearly 10,000 presentations to Sydney EDs the day prior marked the biggest recorded winter day, according to Mr Park.
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