A new report by the Council of Australian Governments Reform Council has found that 31% of Indigenous Australians are experiencing high or very high psychological distress.
Comparatively, 12% of non-Indigenous Australians have the same levels of psychological distress.
Psychological distress refers to how a person feels about their well-being.
The report also shows that people living in low socio-economic areas are twice as likely to experience high levels of psychological distress.
Psychologist and lecturer in Indigenous studies at the University of Western Australia, Professor Pat Dudgeon says the considerably higher rate of distress among Indigenous Australians is not surprising.
"Aboriginal people live in a social context where they're very disadvantaged," she says.
"We know already that the life expectancy rate of Indigenous people is on an average 10 years less than other Australians."
Professor Dudgeon says issues including marginalisation and exclusion from decisions are responsible for the prevalence of psychological distress among Indigenous Australians.
"What we're seeing ... is a consequence of being marginalised and kept out of society," she says.
The release of the report follows the unveiling of a targeted initiative to reduce suicide rates among Indigenous Australians.
Professor Dudgeon hopes the initiative will help to lower the levels of psychological distress among Aboriginal and Torres Strait Islander communities.
"Previously much of what has happened for Aboriginal and Torres Strait Islander people is that we've had solutions imposed on us," she says.
"So I think we need to start from a different place, we need to start with having strong relationships with communities and with community organisations and look at what can be done together, sharing that information across communities as well."