The reserves will add almost 12,000 extra hectares to the NSW forest reserve system and boost habitat connectivity throughout the south east coastal forests.
They will also support the last known far south coast koala population and 25 threatened species, including the long-nosed potoroo, the yellow-bellied glider and the powerful owl.
The National Parks and Wildlife Service will manage the reserves and the NSW Government will work with the Aboriginal owners of the neighbouring Biamanga National Park to ensure they have a say in how the reserves are managed.
The government will also grant $2.5 million towards the future viability of the local timber industry.
Primary Industries Minister Niall Blair said that sustainable timber harvesting practices in NSW meant the renewable timber resource could be extracted responsibly while maintaining a healthy forest.