Chair of the state development committee Greg Pearce said the inquiry will aim "to help support defence and generate greater investment and innovation in the state it is important to consider how to incentivise and grow the defence industry in New South Wales".
Pearce said the the government is looking to enhance the state's capabilities across the defence industry, which they believe are already advanced.
"New South Wales is a leader in advanced manufacturing, cyber security, aerospace, information and communication technology and many other areas directly relevant to the needs of Defence," Pearce said.
"The committee will look at ways to further encourage defence industry innovation, research and education, and workforce development. We will also consider how to maximise the economic benefits of locating Defence Force bases and defence industry in the regions, as well as ways to enhance collaboration between the NSW government and Commonwealth agencies."
The government is encouraging all key players across the state to come forward before submissions close on 18 June 2017.
"The committee will consult extensively throughout the inquiry, including in regional areas. We encourage submissions from interested individuals, groups and organisations," Pearce concluded.
Recently, the state has finished its expansion of Albatross Aviation Technology Park in the Shoalhaven area.