The mass incarceration of Indigenous people in New South Wales is at a crisis point, the peak Aboriginal legal service in the state has said.

Data released on Thursday from the Bureau of Crime Statistics and Research (BOCSAR) shows the number of Indigenous adults in NSW prisons is at an all-time high, despite falling crime rates - both in NSW, and across the nation.

There are 4,103 Aboriginal adults in custody in NSW - an increase of 8.2 per cent since September last year.

Aboriginal adults now make up 32 per cent of the adult custody population - the highest proportion on record.

The Aboriginal Legal Service (ALS) NSW/ACT said the continued and worsening incarceration of Aboriginal people in the state was a crisis which Premier Chris Minns needed to address.

"The Premier has serious questions to answer about how he is going to get Closing the Gap back on track in NSW and why his government has passed laws that have contributed to this growing inequality," ALS chief executive Karly Warner said.

Earlier this year, the ALS, along with human rights groups and members of the Labor Party, were highly critical of the passing of contentious bail laws which they argued was a "devastating betrayal of Aboriginal children in NSW".

They were introduced despite the Premier admitting more Aboriginal children would be incarcerated as a result.

Other legislation introduced include 'wanding laws' - which the ALS said would give "extreme new powers" to NSW police which would disproportionately impact Aboriginal people and which a study found "no evidence" would deters knife carrying - and 'posting and boasting' laws.

The ALS said none of these new laws would reduce crime, nor were they based on evidence.

The ALS said police decisions were "overwhelmingly responsible" for incarcerating mode Aboriginal people.

"BOCSAR data from earlier this year showed the increase in bail refusals by police for Aboriginal and Torres Strait Islander people has been double the increase in bail refusals by courts," an ALS Spokesperson said.

NSW police have been criticised for actions believed to target First Nations groups and communities.

This includes data revealing Aboriginal children are more likely to be strip searched, and communities with large Indigenous populations more likely to be monitored and fined during the COVID-19 lockdowns, pushing already disadvantaged families into financial hardship

The Premier has routinely defended the police - who have cost the NSW taxpayer $160 million in civil claims over five years - saying they are not to blame for Indigenous incarceration.

The record number of Indigenous incarceration is largely driven by adults on remand, despite recommendations from the 1991 Royal Commission into Aboriginal deaths in custody that Indigenous incarceration be a last resort.

More than 45 per cent of the Aboriginal prison population is currently on remand.

Ms Warner said along with the obvious notion prisons cause trauma and increase the likelihood of recidivism, there were known, alternative solutions.

"As a society, how we invest our resources reflects our values," she said.

"If the NSW Government continues to invest in prisons and police instead of meeting the needs of communities, we'll simply end up with more crime, fractured families, and trauma.

"Investing in community-led solutions, including family support, housing, educational engagement, disability and mental health services, and after-hours activities for young people, is what will deliver healthier, safer communities."