The sell-off of some 67 military properties, announced by Defence Minister Richard Marles in February, is expected to rake in $1.8 billion for the federal government.
Among the list of properties to be sold off is Sydney's Victoria Barracks - a complex established in 1840.
Between 450 and 650 personnel and their families are based at the barracks and will be relocated to other defence sites.
A directive reportedly given by Mr Marles to defence officials to vacate the facility by December 19, before being walked back has sparked a political firestorm.
The RSL NSW branch lambasted the decision to dispose of the "irreplaceable national asset" of its books.
"Victoria Barracks is not surplus real estate," RSL NSW President Brigadier Vince Williams said on Wednesday.
"It is the spiritual home of the Australian Army, an operational Defence facility of immense strategic, military and cultural significance, located on the doorstep of Australia's largest city."
NSW Premier Chris Minns has jumped into the fray to challenge his federal Labor colleagues.
He supported the idea of listing the military site on the state's Heritage Council register
"Veterans and the people of NSW have made clear just how significant this unique site is to them, which is why I believe Victoria Barracks should be protected... so its history and heritage are not lost forever," he said on Wednesday.
Labor MP Ron Hoenig told parliament the listing would theoretically prevent it from being commercially overhauled, even if the federal government divests the site.
He dubbed it the "ultimate protection that can exist" after Liberal MP Anthony Roberts proposed an urgent rezoning motion to stop the eviction.
The sale has been criticised by various figures across the political spectrum including Independent MP Allegra Spender and former Prime Minister Tony Abbott, on several grounds including heritage and housing.Â
A petition started by opposition defence spokesperson James Paterson opposing the sale has garnered more than 87,000 signatures.
Defence properties across the nation come to about 3.8 million hectares.
The sites listed include historic military barracks, training depots and a repatriation centre for wounded troops returning from war.
It found some sites were currently vacant or unfit for use because of rusted and derelict buildings, black mould and chemical contamination.
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