Young offenders who go through a specialised court for Aboriginal youth are 40 percent less likely to receive custodial sentencing, according to a report from the NSW Bureau of Crime Statistics and Research.

The NSW Youth Koori Court has been available in Parramatta and Surrey Hills since 2015 and 2019 respectively for eligible young people, providing an alternative to the standard court system for those charged with a criminal offence

The evaluation compared 151 participants of the program to 2,883 Aboriginal people who went through the children's courts and met eligibility for the YKC.

BOCSAR executive director Jackie Fitzgerald said results from the report were encouraging.

"It is an alarming reality that in 2022, 43 per cent of young people in custody are Aboriginal," she said.

"The Youth Koori Court offers a promising model to reduce incarceration rates of Aboriginal young people."

Koori Court is an Indigenous sentencing court bringing the offender, First Nations community members and criminal justice representatives together.

The offender is encouraged to take responsibility for their actions with Elders and other community members allowed to provide cultural and circumstantial elements contributing to their behaviour before determining the most appropriate penalty.

Despite evidence of success the YKC relies on referral from NSW children's courts.

NSW/ACT Aboriginal Legal Service chief executive Karly Warner said Koori Court deserved a wider rollout.

"Decades and decades of evidence have proven that locking children up doesn't work - it causes trauma and only makes young people more likely to return to jail in the future," she said.

"Now we have evidence showing that this alternative approach, the Youth Koori Court, keeps more Aboriginal kids out of jail without any adverse effect on re-offending rates."

Reoffenders were found to be 84% less likely to end up in juvenile control at re-conviction.

Sentencing for participants of the YKC are deferred for 12 months after guilty pleas or proof of committing the offence.

Support plans are implemented to assess the underlying factors of offending, with consultation of nominated Aboriginal and Torres Strait Islander Elders or respected persons and caseworkers.

Similar systems were first introduced in South Australia in 1999, with several other jurisdictions adopting comparable models.