KiwiBuild and Ngāi Tahu Property are working together on the Gorge Road/Fryer Street project.
They have agreed in principle a plan to develop the site and are working on a development agreement that will finalise plans for a new community, featuring 300 homes and also "supporting commercial spaces".
The first homes are expected to be completed in 2022.
"Building housing on the old Wakatipu high school site has been talked about for a couple of year,'' Mr Twyford said.
"It's good to see progress being made.''
The former school site, close to the CBD, was purchased by the Ministry of Housing and Urban Development late last year.
"Queenstown has been hard hit by the housing crisis. It is the most expensive housing in the country, with an average house price of $1.2 million and an average weekly rent of $620," adds Mr Twyford.
"That's why our Government, Ngāi Tahu Property, and Queenstown Lakes District Council are coming together to create a new community, centred around affordable housing and close to the centre of the city [sic].''
Mr Twyford described the project as a "huge opportunity'' for Queenstown and acknowledged the partners on the project and their shared vision for a Queenstown that is "not just a playground for the well-off, but also a place where people on middle and lower incomes can find a place to live.''
