A NEW police complex to be built at the site of Kyneton's historic courthouse and lock-up — which once held Ned Kelly — has been given the go-ahead by Heritage Victoria.

Locals had been concerned the development could affect the site's historical integrity.

But Heritage Victoria executive director Ray Tonkin said a modern police station could be built while retaining heritage values.

He said the 1851 courthouse, Victoria's second oldest, would not be harmed by the development.

Mr Tonkin said the significant buildings would be retained and restored, including the 1861 lock-up and 1880s red-brick police station.

"This permit requires Victoria Police to restore the external fabric of the lock-up and 1880s police station, and undertake ongoing maintenance to protect these heritage buildings," Mr Tonkin said.

"Importantly, the lock-up will be visible from Jennings Street for the first time in more than 50 years. The 1950s brick buildings hiding the lock-up from street view are not considered significant and will be demolished," he said.

He said the new two-storey police station would be set back from the street and would not detract from the heritage significance of the site.

Heritage Victoria has also announced that it has added Kyneton's 1862 Willis Flour Mill and 1858 Botanic Gardens to the heritage register.

New Macedon Ranges Mayor John Letchford welcomed the approval for the new police station.

"It is going to be a great facility for Kyneton and the surrounding policing district," he said.

The new complex would meet police needs while also preserving the site's historical significance, he said.

Larina Strauch, collection manager with the Kyneton Historical Society, said the court and jail site were important for the history of Ned Kelly and Kyneton. "As a 15-year-old, he (Kelly) was held at the Kyneton police station for three weeks," Ms Strauch said.

She said Ned Kelly was held because he had been associating with a known bushranger.

Ms Strauch said it was important to maintain the historical integrity of the courthouse and jail site.

"It is important because Kyneton was instrumental in laying down the foundations for establishing law and order in Victoria.

"It is also significant to the heritage landscape of Kyneton."

Police spokeswoman Marika Fengler, said the Kyneton Historical Society would have a display in the cells and police would ensure public access to the old cells.