The NSW premier says Multiculturalism and Disability Services Minister Ray Williams' cabinet position is "untenable" if he proceeds with a spill motion against her deputy leader.
Gladys Berejiklian on Friday afternoon said she'd spoken to Mr Williams and Treasurer Dominic Perrottet and reminded them the government was expected "to be solely focused on delivering for the community".
Her statement came after Mr Perrottet, the member for Hawkesbury, announced he would challenge Mr Williams for pre-selection in his former seat of Castle Hill.
The move threatens to destabilise the government, with Mr Williams calling on the treasurer to step down as deputy leader of the party or face a spill motion on Tuesday.
Ms Berejiklian in her statement said Mr Perrottet had her full confidence as deputy leader, and she'd asked Mr Williams to refrain from proceeding with the motion.
"Otherwise, his position in cabinet is untenable," she said.
Opposition Leader Luke Foley earlier said the situation showed the Liberals learned nothing from the backlash that followed the toppling of former prime minister Malcolm Turnbull.
"The public are sick and tired of politicians focusing on themselves," he told reporters in Sydney.
"The Liberal Party civil war has moved from the federal parliament to the NSW parliament and good government has been totally ignored."
Mr Foley said the dispute amounted to a "complete failure of leadership" from Ms Berejiklian.
Announcing his decision to contest pre-selection, Mr Perrottet said he was no longer able to balance his work and family commitments while giving the people of Hawkesbury the representation they deserve.
"This is not a decision I have taken lightly and comes after a great deal of reflection and discussions with my family and colleagues," he said in a statement.
Mr Williams said in a statement of his own: "My community is everything to me and I will be contesting the seat of Castle Hill at the next election and will continue to work hard on behalf of my local community."
"Given Dominic is challenging myself as both a fellow member of parliament and a ministerial colleague I believe it is untenable for him to remain as the deputy leader," the minister said.
He said if the treasurer quit cabinet he would too, "whilst this battle rages over the next three months".
Prime Minister Scott Morrison, a former Liberal Party state director, said it wasn't for him to address the issues inside the NSW wing of the party.
"I tend to stay out of the politics of other chambers," he told reporters in Sydney.
