The RMS mistakenly sent letters to dozens of Blackheath residents, warning them their homes may be compulsorily acquired for the highway duplication.
The revelation was made by Blackheath Highway Action Group spokesman Michael Paag at a large public meeting in the town last night.
"Those letters were sent to you in error... It was a gross error, a mistake. It isn't right to treat our community with such disrespect."
Mr Paag said Alistair Lunn, the director, western region, for Transport for NSW (which RMS is now part of) had admitted the mistake in a phone call to the action group on Wednesday night.
All the residents - numbering many dozen on the western side of the highway - would now be contacted to tell them the letters were not meant to be distributed, he said.
The letters, or leaflets, were dropped into homes and letterboxes in Station St and nearby roads late last week.
They notified residents that their homes were "in an area of interest within the corridor. Because we are in the early stages of the program, we are not acquiring property but we are investigating a strategic corridor area."
Residents who received the notices were shocked and dismayed. Many were extremely upset at the prospect of losing much-loved homes.
When Mr Paag told the meeting last night of the "stuff up", there were gasps of astonishment from the crowd.
Later the mayor, Mark Greenhill, apologised to the residents, although neither he nor council had any role in the notices being distributed.
"I apologise to you ... because there's no elected official from the government here to do so. You should never had received those notices and I'm very sorry that you did."
Transport for NSW gave the action group a statement, which said in part: "Transport for NSW apologises for any concern to the community caused by a flyer that did not fully explain the breadth of options and status of planning for Blackheath."
It is understood the leaflets were supposed to be distributed in Hartley on the other side of Victoria Pass, where public consultation is well advanced.
Blackheath residents only learnt of the highway duplication plans on November 7, when the Regional Transport and Roads minister, Paul Toole, held a press conference in Lithgow.
The plans look at four options for Blackheath: a wide bypass over Centennial Glen and Porters Pass, a narrow bypass along Station St beside the railway line, expanding the highway through the middle of town or a tunnel.
Transport for NSW has pointed out that the upgrade is in the early stages of planning and no decision has been made on which of the possible route options will become the final highway alignment.