A NSW Government audit has found over 1,000 buildings could contain dangerous cladding.

The audit launched in the wake of London’s Grenfell Tower fire covered more than 178,000 building projects around NSW, identifying 1,011 buildings that may have dangerous cladding.

Fair Trading minister Matt Kean said building owners will now be instructed to inspect the cladding.

“I don't want to frighten people out there, but what we're asking people to do is give themselves peace of mind by undertaking a fire safety inspection of those buildings,” Mr Kean said.

“We're also asking councils to check their data sets to ensure that we don't miss any properties.”

The government is also working on new legislation to ban the unsafe building materials.

Mr Kean said some building owners could be compensated for the cost of removing dangerous cladding.

“There are a number of remedies available, that currently exist in law, that enable people to claim for defects,” Mr Kean said.

“We're not proposing any changes to the defects rules at the moment.

“But what we do know is that we want to ensure that people are safe in their homes and we'll do whatever it takes to make sure that happens.”