Arnhem Land residents in the island in the Gulf of Carpentaria told the inquiry on Monday that boys as young as 10 aspire to go to Don Dale Youth Detention Centre.
Groote Eylandt's Angurugu school principal Stephanie Blitner said her community must break the prestige prison has among youngsters.
"Their uncles went to jail, so that's how they become a man," she says.
"They just think they're going to be able to pump iron and come back with muscles."
Ms Blitner has been teaching at the school since the late 1980s and says attendance rates now stand at 40 per cent.
Indigenous kids living on the mineral-rich island face a lack of adequate housing, food and education, despite Traditional Owners supposedly receiving millions in royalties from South32's GEMCO manganese mine.
The Northern Territory Royal Commission into youth detention Commissioners Margaret White and Mick Gooda are touring remote Indigenous communities across the Northern Territory before the inquiry resumes formal hearings in November.
The next stop is Central Australia, with the inquiry visiting Yuendemu on Wednesday and Mutitjulu on Thursday.
Prime Minister Malcolm Turnbull announced the inquiry in July after ABC's Four Corners aired footage of boys being tear-gassed, shackled and spit hooded at Don Dale.