Transforming a major piece of Sydney's public space from a former mental health hospital to an "iconic urban parkland" is a delicate dance for the state government.

Callan Park is a 61-hectare parkland in Lilyfield containing over 130 historic buildings — many of which relate to a former psychiatric hospital.

Originally known as Callan Park Hospital for the Insane, the site was used for over a century from the late 1870s onwards.

During parts of its history, chemical restraint was common, and a royal commission found evidence of "cruelty" and little "active treatment or rehabilitation" being performed.

A proposal to revamp the site includes restoring heritage buildings, welcoming film crews, and land use opportunities for cafes, markets, galleries and museums.

But legislation means de

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