Almost 2000 families from New South Wales have received legal advice as part of a landmark agreement to stop children being placed in out-of-home care.

The new agreement, introduced by the state Government last year, involves a partnership between Legal Aid NSW, the Aboriginal Legal Service (ALS) NSW/ACT, and the Department of Communities and Justice (DCJ).

The Legal Assistance for Families Partnership Agreement (LAFPA) is designed to ensure all families, particularly those who are First Nations, are guided towards early legal advice when the risk of a child being removed becomes apparent.

DCJ data from the March quarter found 14,129 children across NSW were in out-of-home care (OOHC), with information from the Productivity Commission revealing almost 45 per cent of those were Indigenous.

ALS NSW/ACT chief executive, Karly Warner, said caseworkers are 12 times more likely to remove Aboriginal children from their homes than non-Aboriginal children.

"This growing over-representation is unacceptable and it's denying Aboriginal children their rights to grow up safe and strong in community and culture," Ms Warner said.

In June, two reports found the DCJ does not monitor the wellbeing of children in OOHC, failed to effectively safeguard the rights of Aboriginal children in contact with the child protection system, and were not complying with legislated principles for the protection of First Nations children.

In response, AbSec chief executive John Leha said it was a path "leading us down the path of another Stolen Generation".

34 per cent of clients who received advice from Legal Aid through the LAFPA identify as Aboriginal or Torres Strait Islander.

Legal Aid NSW Family Law Executive Director Katie Kelso said: "We know from the Family is Culture report that for Aboriginal children - who are 10 times more likely to enter foster care - placement with family or kin maintains vital connections to culture and community."

In one case, Sue (not her real name), an Indigenous woman who was about to have her children taken into care due to issues around substance usage, was able to access Legal Aid's Family Law Service for Aboriginal Communities whilst the DCJ were at her house.

As such, Sue was able to nominate a maternal grandmother to care for the children while she completed residential rehabilitation.

"By providing early legal advice, we can empower families to find the solutions that are best for them and their kids," Ms Warner said.

"We can reduce the risk of a child being removed from their family, home, school, Country, cultural connections, and everything they know."

Ms Kelso added: "These alternative care arrangements involving family members can potentially prevent some of the adverse outcomes of foster care, such as children being subjected to harm or being at increased risk of engagement with the criminal justice system."

NSW Minister for Families and Communities, Kate Washington, said the LAFPA was about ensuring families have the information and legal advice they needed when they came into contact with the child protection system.

"By lining up legal advice, the NSW Government is backing families to come up with solutions to stay safely together," Minister Washington said.