The NSW government will establish a $1 million community fund to help Captains Flat residents remediate lead contaminated soil on private properties.

The confirmation of lead in surface soils in 2021, due to a mine next to the town that closed in the 1960s, prevents residents from building or altering their homes and growing vegetables in the ground.

Monaro MP Steve Whan says the fund will be administered by the local council, and a "containment cell" for contaminated materials will also be set up.