According to Fairfax, over 8000 lap-banding surgeries are conducted in Australia each year, but 95 per cent are done in private hospitals.
The policy to fund such operations in public hospitals will be unveiled as part of a strategy aimed at the 51.7 per cent of adults who are overweight or obese.
Health Minister Reba Meagher is also likely to declare the establishment of one-stop clinics to deal with obesity-related conditions such as diabetes, kidney failure and heart disease.
Patients with a body mass index of 30 or more can be referred by their GP to the clinics, which will have access to specialist physicians, diabetes nurses, dietitians, psychologists and exercise physiologists.
Ian Caterson, Professor of human nutrition at the University of Sydney, said that this kind of multi-disciplinary approach is needed if the state is going to beat the obesity epidemic.
"We don't have anything that's logical and connected, and to tackle obesity you need to be able to go somewhere which has all the modern treatments, and that includes bariatric surgery," News.com.au quoted Professor Caterson, as saying.
Lap-banding involves keyhole surgery to insert a band around the top of the stomach, so patients eat less.
It is considered a relatively safe and cost-effective way to reduce obesity-related conditions such as heart disease, diabetes and cancer.
A study from Monash University showed that obese patients who had gastric bands fitted were five times more likely to be free of diabetes than patients trying diet and exercise.
However, the potentially life-saving option has been largely out of reach for those without private health insurance or able to pay 10,000 dollars.
At least 1.13 million people in New South Wales (NSW) are obese, with that number predicted to grow by about 15,000 people a year.