A vacant area near the Cleddau River locals call ''Little Tahiti'', about 500m from the water's edge, had been settled on, Milford Sound Development Authority chairman Jeff Grant, of Balfour, said on Tuesday.
The idea had support from other parties and it was hoped to have the area operational by spring next year, he said.
Because the sound is within the Fiordland National Park, Department of Conservation (Doc) approval was required and was being sought.
The authority, comprising representatives of the Southland District Council and major tourism operators, was also building a new 60-space car park at Deep Water Basin, about 400m from the main car park, Mr Grant said.
Milford Sound has always been a popular tourist destination, with most people arriving by car, camper van or bus via the Milford Sound Highway.
New Zealand Transport Agency (NZTA) statistics show average daily traffic on the road throughout the year was 608 in 2010, rising to 697 last year.
Just over 80% of traffic was passenger vehicles or camper vans.
The journey from Te Anau to Milford Sound took about two hours, and with limited accommodation available at the sound, traffic peaked between 11am and 2pm, Mr Grant said.
With visitor numbers increasing rapidly again after falling away during the global financial crisis, the car park could be ''overfull'' up to 10 days a year, he said.
Southland tourism organisation Venture Southland (VS) has revived the idea of a ''park 'n' ride'' system to relieve parking pressures at the sound.
Business and strategic projects manager Steve Canny said visitor numbers were expected to top 600,000 in the 12 months to the end of last month - a record since visitor numbers had been kept.
The park 'n' ride system would require private motorists to park somewhere - possibly at Te Anau or another point along the Milford Sound Highway - and travel the rest of the journey by coach during peak periods.
While increasing visitor numbers were ''good for tourism'', it was important to ensure tourists remembered Milford Sound for the right reasons, Mr Canny said.
''Like all pristine destinations, it is critically important we don't destroy the goose that laid the golden egg. Ensuring that people still have a great experience is fundamental. They don't go to look at a car park.''
He said the park 'n' ride idea was first raised in 2005 as part of an integrated Milford Sound transport document which included other options such as tunnels, gondolas and monorails, all of which have since been rejected.
It was shelved when visitor numbers dropped off.
However, Mr Canny said it was time to revive the idea.
VS intended to circulate a preliminary report to its three owner councils, the Invercargill city and Southland and Gore district councils, and other parties in the next few weeks and it would be up to those groups to decide the way forward.
Mr Grant said he did not support a park 'n' ride system by itself because parking congestion did not occur often enough to warrant it.
''If we were suddenly to jump to 750,000 visitors a year it might be warranted. But as it is the congestion is limited to less than 10 days in the middle of summer.
"And those who think it is congested are usually domestic visitors - it's not a big deal for international tourists at all. They are used to it.''
But Mr Grant said the authority supported discussion on how to relieve parking pressures and encourage tourists to visit outside the 11am-2pm period.
''We have indicated we do need to sit down with [others] and discuss the outlook for the next 10 years.
''Putting solutions in place takes time.''
