Chief Minister Michael Gunner says the move delivers on an election promise from Labor.
"It's clear that Territorians are concerned about the effects of fracking on our land, water and environment. My government is acting on those concerns," Mr Gunner said on Wednesday.
"We heard loud and clear the concerns of everyday Territorians, pastoralists, amateur and commercial fishermen, tourism operators, traditional owners, Indigenous rangers and environmental groups."
The ban on fracking will take immediate effect and applies to all hydraulic fracturing of unconventional oil and gas reservoirs, either for exploration or extraction.
It does not apply to any existing operations though the government says only one is still ongoing and the fracking component has been completed.
However, Lock The Gate Alliance, a national coalition vowing to protect Australian natural and cultural resources from "unsafe mining," have issued a statement saying the measure is not enough.
"Under this so called moratorium, gas fracking companies can still undertake other shale gas prospecting and exploration activities, trying to muscle in on the right to frack through our groundwater into the future... Gas companies will be able to keep on drilling gas wells across the landscape, ready to frack as soon as the opportunity arises."
The Lock the Gate Alliance have organised various protests Australia-wide, opposing fracking and other mining activities.
The NT government investigation will be conducted by a panel including experts in geology, and environmental regulation with its deadline to report back to the government yet to be determined.
Public consultation sessions will also be conducted in Darwin, Katherine, Tennant Creek, Alice Springs and other regional centres.
Mr Gunner said the investigation would determine whether fracking could be safely conducted or whether it presented too great an environmental risk.
He also pledged to release the finding of the panel's report.