Cr Moore told a press conference on Monday that an immediate temporary 24-hour "safe space" would be established where those currently living in tents in Martin Place would be relocated.

Cr Moore said the City would contribute $100,000, and she expected the Department of Family and Community Services to also contribute $100,000 to establish a permanent 24-hour facility that provided food, showers and laundry facilities, as well as links to homelessness services.

The $100,000 funding contribution was passed at the city's council meeting on Monday night.

Cr Moore said the negotiated solution had the support of Premier Gladys Berejiklian, with whom she had spoken on Monday afternoon.

Describing the outcome as a "peaceful resolution" Cr Moore said the so-called mayor of tent city Lanz Priestley had agreed, on behalf of the homelessness camp, to dismantle the tents as soon as Tuesday morning, when the first council trucks would move in.

However, there appeared to be ongoing confusion over the details of the temporary space on Monday evening, including where the space would be located.

Mr Priestley said that he understood the temporary space would include the provision of sleeping arrangements for the homeless. But Cr Moore said no accommodation would be provided.

"If we don't have somewhere for people to sleep, then we still have the same problem," he said. "In the lord mayor's mind, if we are talking about a different concept, I think we have to have another discussion."

Cr Moore's press conference came ahead of fiery City of Sydney council meeting, where councillors said they had been ambushed by the mayor's announcement.

Independent councillor Angela Vithoulkas said councillors had not been briefed on details of the proposed solution but were expected to "either blindly agree" or disagree and be labelled "against supporting the homeless situation."

Liberal councillor Christine Forster said Cr Moore's proposed solution did not address the issue of whether people would be allowed to continue to camp in the busy thoroughfare if they chose not to honour the agreement reached with Mr Priestley.

As the councillors grilled the mayor on the details of the agreement on Monday night, it became clear the camp may remain in place for some time yet while the location of the temporary safe space was finalised.

The interim space was "agreed this afternoon, so I can't tell you where it is [going to be]," Cr Moore told the meeting.

"They've said they will start moving their equipment out when our trucks arrive."

City of Sydney chief executive Monica Barone said the council trucks will immediately remove parts of the camp "that were no longer required" but said total dismantlement was "subject to the safe space being provided."

Cr Moore said her recent discussions with the premier had not produced a long-term housing solution, and called on the state government to extend the City's affordable housing levy across the entire local government.

Ms Moore said talk in recent days from the NSW Police Commissioner, Mick Fuller, of "throwing people in the back of trucks" was "really scary for homeless people".

Earlier on Monday, Ms Berejiklian urged the City of Sydney to "do the right thing" and resolve the issue.

Ms Berejiklian ;said that if the City didn't use their existing powers, then the state government would be forced to step in.