Vulnerable Aboriginal children would be placed in "kinship-care" rather than put up for adoption under tough new reforms of the state's child protection regime.
The new laws, which are set to be debated in state parliament on Thursday, would see NSW become the first jurisdiction in Australia where child protection authorities would be required to consider adoption before placing a vulnerable child in foster care.
The reforms are aimed at providing a more stable environment for children, instead of a situation where they might be shunted from home to home under the foster-care system.
Community Services Minister Pru Goward said on Thursday it was preferable for vulnerable children to be given up for adoption rather than be placed in multiple foster-care homes if their birth parents were deemed unable or unwilling to care for them.
"The first preference is for children to have lived with their own families," Ms Goward told ABC Radio.
"But when that is clearly not possible, when there are clearly no relatives available who could look after the child and would become the child's guardian, then in my view we are better to consider adoption than to go to foster care where the child inevitably has a range of carers and a very unstable childhood."
However, Aboriginal children would be treated differently under the new laws so as to avoid repeating policies that lead to the "Stolen Generations", when thousands of Aboriginal children were forcibly removed from their homes.
Of the 18,000 children in out-of-home or foster care in NSW, about a third are Aboriginal.
"Of course for Aboriginal children we would prefer kinship-care or guardianship, understanding the very unhappy history that Aboriginal children have with being removed from their families," Ms Goward said.
Adoption would only be considered if a court had ruled that a child was to be removed from their home until the age of 18.
The laws would also allow authorities to seize babies at birth if their mothers abused drugs or alcohol during pregnancy, rather than having to wait until after a child is born before they can intervene.
The reforms also have implications for women and children affected by domestic violence, with mothers to be given an opportunity to end a relationship before their child is seized.
"This is a great improvement on the current system where there is no leniency, where there is no attempt to give the woman a chance to break off the domestic violence relationship. The child is just removed," Ms Goward said.