The sale of Tasmania's biggest farm to an overseas company for use as plantation forestry has raised eyebrows and been labelled an attack on producers.

On Wednesday the federal government announced it had accepted Foreign Investment Review Board advice to green light the sale of Rushy Lagoon in the state's northeast.

The sale, reportedly worth more than $100 million, puts 21,000ha of land in the hands of Tasmanian Natural Asset Trust, which is managed by the UK investment firm Gresham House.

Commercial softwood plantations, plus large-scale conservation and ecological restoration and sustainable grazing, are planned for the site.

The "very difficult" decision followed consideration of economic and environmental factors and was not contrary to the national interest, Treasurer Jim Chalmers said.

Tasmania's peak farmers body, the state government and federal opposition have slammed the decision and raised questions about the use of taxpayer money in the project.

"This is a disgraceful outcome for Tasmania and for Australian food security," TasFarmers president Nathan Cox said.

"Rushy Lagoon has fed Australian families for generations."

The property had been owned by New Zealand's Pye family since 1996 and at its peak contained thousands of dairy cows, beef cattle and sheep.

Rushy Lagoon had started decommissioning its dairy business, while Tasmania's government classified the property as marginal agricultural land, Mr Chalmers said.

The Australian government-owned Clean Energy Finance Corporation and Department of Agriculture, Fisheries and Forestry have invested in the new project, which is set to create 190 jobs.

Acting Tasmanian Premier Bridget Archer said there were questions about why the federal government committed support before the review board's decision.

The sale was an "attack" on farmers and will have a significant impact on the state's agricultural capacity, she said.

"We recognise the value of investment in regional Tasmania, but we hold serious concerns about the way this process has played out," Ms Archer said.

The sale was welcome and would address a significant reduction in forestry plantations across Australia over the last decade, the Australian Forest Products Association said.

"During the building boom in COVID, we couldn't rely on imports to meet our housing needs in Australia," acting deputy chief executive Dominic Lane said.

"New opportunities to strengthen our sovereign capability and investment are critical."