Minister for Indigenous Australians, Linda Burney, has announced she is stepping down from the ministry and will not contest her seat at the next election.

The first Indigenous woman to serve in Federal Cabinet, Ms Burney, 67, was widely expected to retire and the announcement will see a new minister take over the portfolio.

Speaking in Canberra, a visibly emotional Ms Burney said it was "time for me to pass on the baton to the next generation".

"I was the first Indigenous person elected to the New South Wales Parliament, the first Indigenous woman in the House of Representatives, the first Indigenous woman to be appointed by this wonderful man here to Cabinet, but I won't be the last. To me, that is progress," she said.

"Stepping back will give me time to do other things including spending more time with family and loved ones.

"My entire life has always been about service, and I believe I have a valuable contribution to make outside the Parliament in the future."

Having previously served in several senior portfolios in NSW parliament, becoming the first Indigenous person to do so, Ms Burney switched to federal politics in 2016, winning the southern Sydney seat of Barton in 2016, and, in turn, becoming the first Aboriginal woman in the House of Representatives.

"I am a member of the mighty Wiradjuri Aboriginal nation," she said in her inaugural speech in NSW Parliament.

"Growing up as an Aboriginal child looking into the mirror of our country was difficult and alienating. Your reflection in the mirror was at best ugly and distorted, and at worst non-existent."

Prime Minister Anthony Albanese praised Ms Burney, arguing that "anyone who has the honour of calling Linda a friend understands the great strength behind her warmth and the courage, that is the essence of her grace".

"The discrimination, hardship and loss she had to overcome in her life is more than most of us can comprehend," he said.

"Linda was born into an Australia where she was treated as a second-class citizen, and indeed was not recognised. Yet her life is a record of profound firsts.

"This is remarkable proof that what Linda has drawn from everything she had to endure, it is not bitterness or despair. It is positive, it is one of hope and one of optimism for our nation."

Ms Burney, from Wiradjuri and Scottish descent, has suffered a series of tragedies in her life, making her legacy even more remarkable.

She lost her long-time partner in 2006, before tragically losing her 33-year-old son, Bini, in 2017.

She has also struggled with her health, telling the ABC last year she had surgery which affected her voice as she was getting too much oxygen into her lungs.

It followed on from a mini stroke she suffered in 2020, where she subsequently underwent surgery for a hole in her heart.

On Thursday, Ms Burney said she was proud to have made a difference to the lives of First Nations people across the country but noted the immense disappointment of last year's referendum result.

It is understood the defeat hurt her personally, but she noted whilst the referendum "didn't deliver the outcome we had hoped, I think history will treat it kindly".

"But I know in my heart, I gave all that I could to close the gap and to advance reconciliation," she said.

She told reporters: "The referendum outcome was of course disappointing, but we accept that outcome but let me tell you there are some silver linings in that outcome. The silver lining of 6.5 million Australians saying 'yes.'"

"The silver lining of a new generation of young Indigenous leaders coming through, and the silver lining in high Aboriginal communities like the Tiwi Islands, like Yuendumu, like Yarrabah, the vote was up to 92 per cent," Ms Burney said.

"So, whilst people might think it is a defeat, there is some very good things that came out of the referendum."

She argued progress "doesn't always move in a straight line," arguing often the advances are tarred with setbacks.

"That's the history of Indigenous justice in this country. But with every passing generation, the arc bends a little bit more towards justice," she said.

"I have had my bit and the time for a new generation is now."

Ms Burney also used her press conference to criticise the opposition's approach to Indigenous affairs, arguing that "you bring people with you if you want change to happen".

"That's how we're approaching this," Ms Burney said.

"It makes me very, very sad that we do not have a bipartisan approach to these issues, and I think First Nations people and the Australian people would like to see that change."

Assistant Minister for Indigenous Australians, Senator Malarndirri McCarthy, is widely expected to be elevated to the frontbench, with Lingiari MP Marion Scrymgour and Victorian Senator Jana Stewart possible choices to fill the Assistant Minister's role.