Asbestos has been discovered at Timaru's Theatre Royal, which is undergoing a multi-million-dollar redevelopment.

The Timaru District Council said the ground floor auditorium and stagehouse have been closed and isolated after testing last week found asbestos in plaster in the auditorium.

The council is redeveloping the historic Theatre Royal and constructing a new museum on an adjacent site at a cost of $25.8 million.

Project director Paul Haggath said the asbestos discovery was not unusual for a building of this age and appropriate measures had been put in place to deal with it.

"The asbestos within the plasterwork is inert and harmless while it remains encapsulated. We are undertaking checks and measures to ensure that all areas with potential asbestos are properly sealed and encapsulated before any further work proceeds," he said.

"There is no risk to the public, and we will provide updates as the issue is resolved."

Haggath said WorkSafe had been notified.

Work across other areas of the project, including the roof, lobby, back of house, front of house, and Te Kura Marumaru South Canterbury Museum construction, was continuing unaffected, he said.

The redevelopment was expected to be completed at the end of this year.