But in a highly principled stance, the Liberal Democratic Senator said he would support the idea of removing the two clauses from the Constitution that the Recognise campaign is advocating.
The Federal Government is funding the Recognise campaign, which calls for the removal of sections 25 and 51 (xxvi) from the Constitution.
Section 25 of the 114-year-old document provides provisions for disqualifying people of a certain race from voting.
Section 51 (xxvi) allows the federal parliament to make certain laws for "the people of any race for whom it is deemed necessary to make special laws". This section was changed in the 1967 referendum to remove the overtly racist words "other than the Aboriginal people in any State".
"As soon as you start applying special recognition to a group of people, that's racism. You can have positive racism and negative racism, but it's still racism"
"If we are going to amend the Constitution then I'd be certainly happy to delete those aspects. Any reference to race in the Constitution, in my opinion, is misguided," Senator Leyonhjelm said.
"As soon as you start applying special recognition to a group of people, that's racism. You can have positive racism and negative racism, but it's still racism."
The Recognise campaign has called for separate sections to be added to the Constitution which acknowledge Indigenous people as Australia's original inhabitants and their special connection with their country; as well as special provisions to protect them from racial discrimination.
The Prime Minister has committed to "sweat blood" on changing the Constitution to recognise Aboriginal and Torres Strait Islander people, something that can only be achieved through a referendum.
"[Prime Minister Abbott] was out of step on the knighthood of Prince Philip, he's out of step with society on same-sex marriage, I think he's out of step with Australia on this issue too. Constitutional recognition is a racist step and I think they will reject it in the end," Senator Leyonhelm said.
It is possible to oppose recognising Indigenous people in the Constitution and support some of the changes Recognise campaigners are calling for, according to the Senator.
"Prime Minister Abbott was out of step on the knighthood of Prince Philip, he's out of step with society on same-sex marriage, I think he's out of step with Australia on this issue too"
Senator Leyonhjelm says he has firsthand experience of racism, having lived in Rhodesia (now Zimbabwe) for eight months and travelled through Apartheid South Africa.
"I'm an anti-racist. I'm a purist anti-racist. Putting special recognition for people based on their race in the Constitution is itself racist. So, I'm opposing racism."
The NSW Senator is one of eight micro-party politicians in the Senate that the Coalition needs to get on side to ensure broad support for its policies. Senator Leyonhjelm said several of his fellow crossbenchers did not support Constitutional recognition.
Liberal Senator Cory Bernardi has indicated he would champion a 'no' campaign on a recognition referendum, a move several Liberal backbenchers have indicated under the condition of confidentiality to NITV News they would support.
Senator Leyonhjelm said he would also support a 'no' campaign, and instead prefer practical changes for Indigenous people.
"Poverty, neglect, child abuse, welfare dependence, they're not race-based. We shouldn't pretend they'll be solved by recognition or a race-based distinction."
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