The first of Liddell power station's four 500 megawatt turbines will be shut down on Friday, marking a major milestone in the state's clean energy transition.
The federal government had pressured the power station's owner, AGL, to keep the 51-year-old plant running despite it being at the end of its operational life.
The closure of the first unit will deliver an annual reduction in greenhouse gas emissions equivalent to taking around 400,000 cars off the road.
The plant will be gradually shut down over the next 12 months before the site is converted into an integrated, low-carbon industrial energy hub.
"We announced the retirement of Liddell in 2015 and seven years later we are pleased to be in a position to begin the orderly and responsible closure and transition of the power station in line with our climate commitments," AGL Chief Operating Officer, Markus Brokhof said.
"As the power station nears the end of its technical life, we are focused on ensuring it continues to operate safely for our people while providing power reliably."
Liddell represented a new era of electricity generation in Australia when it was switched on in the winter of 1971. It remained the state's largest generator until the construction of Bayswater and Eraring power stations in the mid-1980s.