The Agency will provide funding to develop the site through an agreement between the court-appointed administrator and a Northern Ireland-headquartered construction company.
An estimated 100 jobs will be generated during the construction phase of the project, which is expected to last approximately 18 months. When completed, the first phase will consist of 95 mainly three-bedroom and four-bedroom houses.
The site has outline planning for 510 residential properties, which may be delivered in subsequent phases subject to market conditions and the success of the initial phase.
NAMA Chairman Frank Daly said: "This is a real statement of intent about our Northern Ireland loan portfolio. We are committed to supporting projects that can deliver a commercial return and I hope that there will be more projects like this in Northern Ireland.
"We are funding this development because it will deliver quality homes for people looking to live and work in Belfast. It will turn an unused site into a development that will benefit the Agency as well as homebuyers, the city of Belfast and the people who work on building it."
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The site will be developed by Baker Tilly Ryan Glennon, the court-appointed administrator to the site, and a subsidiary of the Northern Ireland-headquartered Lagan Group.
Speaking about the decision to fund the development, Mr Daly said: "In deciding how to get the best possible return from this site, we were faced with a choice. That was between selling an undeveloped site to the highest bidder, and funding the development to create a more valuable asset.
"We are confident that the choice we have made will deliver a better commercial return. This is consistent with our policy – in Northern Ireland and elsewhere – of managing our assets from a long-term perspective and taking account of local market conditions.
"We would welcome proposals from our debtors and receivers/administrators in relation to other viable projects in Northern Ireland and continue to encourage parties interested in availing of vendor financing in Northern Ireland to approach us."
Finance Minister Sammy Wilson said: "The release, and more importantly the development of the Millmount site is welcome news. It will provide much needed business and employment for the construction sector and will generate activity in the property market once complete.
"NAMA has had a difficult job to do in restoring liquidity, stability and confidence in the Irish financial sector, but this is an example of the positive role the Agency can play in Northern Ireland. I had previously called on NAMA to manage the significant assets it controls in Northern Ireland carefully and had sought and received assurances that it would not engage in any sort of 'firesale'. This is evidence of NAMA taking a longer term measured view in this regard."
The NAMA Chairman has also announced that the Agency is in discussion with a Northern Ireland mortgage provider and is examining the regulatory feasibility of extending its 80/20 Deferred Payment Initiative to houses controlled by its debtors and receivers/administrators in Northern Ireland.
The 80/20 Initiative was launched on an initial pilot basis in the Republic of Ireland last May and subsequently extended. The initiative aims to provide house buyers with a level of protection against reductions in housing values during the first five years after purchase. Subject to lender agreement and regulatory approval, it is anticipated that Millmount will be suitable for the initiative.
(CD/H)
