Recent flooding in the state's central west and elsewhere has caused severe damage to regional road networks, in some cases disrupting harvests and other industry activities.
NSW Premier Dominic Perrottet will announce the funding in Molong on Tuesday, with roughly $280 million expected to go to regional councils and around $220 million to be spent in Greater Sydney.
Bathurst mayor Robert Taylor told AAP on Tuesday while he was still largely in the dark as to the details of the initiative, mayors would take what they could get.
"I've driven out here to Molong today and I thought our roads around Bathurst are bad - the ones around here are like dodge 'em cars," Mr Taylor said.
"Everyone desperately needs our roads fixed."
He said in some cases filling potholes was a band-aid solution where sections of road need to be ripped up completely and re-done.
"To repair the roads that we've got would be the ideal thing, but you'd have to rip up some places like 100 or 200 metres to fix them up properly," he said.
"So that needs major funding but this will do in the meantime. It's a good start, we're not going to knock it back."
Narrabri Mayor Ron Campbell said the funding was a major step up from what his council had received from the state government in late 2022 as part of a $50 million pothole fund.
"I think at that time Narrabri got around $739,000 which is good. Looking at this $500 million one is a great thing," he said.
The NRMA's Fix Our Broken Roads report released in December revealed NSW councils already faced a $1.9 billion backlog in 2020/21 to maintain roads to a safe standard.
NRMA spokesperson Peter Khoury welcomed the government's expected funding announcement.
"It's going to be absolutely critical that the state and federal governments are providing ongoing support to councils just because of the sheer size and scale of the damage over the last 10 months since the rain started," Mr Khoury said.
"Obviously there's going to be a lot of work to do and while this will not address the issue right across the state in its entirety, it's a very good start."
He also strongly encouraged the federal government to pitch in to help councils fix roads.
Before Christmas, the NSW government said 190,000 potholes had been repaired since February.
In seven weeks from mid-October, more than 82,000 roads nationwide were impacted by flood-related closures according to Australian Climate Service and figures.
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