Local councils will be offered guidance and support for their work with Aboriginal organisations towards Closing the Gap.

A $176,000 NSW government grant has been allocated towards a "tool kit" for councils to be developed by Local Government NSW with the aid of the state's Coalition of Aboriginal Peak Organisations and Aboriginal Affairs NSW.

Aboriginal Affairs NSW said the tool kit is a key initiative of the state's Closing the Gap Partnership Agreement, signed in February as an addition to 2020's National Agreement and National Partnership Agreement.

"This new toolkit will help local government officials understand how they can empower and support Aboriginal communities to Close the Gap," Aboriginal Affairs NSW Deputy Secretary Shane Hamilton said.

"Closing the Gap initiatives work best when they are delivered in partnership with Aboriginal people and communities.

"To make real change in Closing the Gap, all levels of government – local, state and federal - must work together, in true partnership with Aboriginal people and communities. Closing the Gap will strengthen our society, economy, culture and communities."

The toolkit will provide council staff with information on working with local Aboriginal organisations and communities, with self-assessment available and examples of successful partnerships.

It is set to be developed over the coming 12 months.

Broken Hill City councillor and Local Government NSW President Darriea Turley said the councils around the state have had an appetite for resources towards Closing the Gap.

"Local councils plan their services to cater for the specific needs and aspirations of their communities and are already doing some amazing work with local Indigenous communities," she said.

"This toolkit will become an invaluable resource and is a real win for the communities councils represent. It will enhance councils' knowledge, understanding and capabilities to support progress in Closing the Gap priority reforms and socio-economic indicators."

"Councils have long expressed interest in being better supported to contribute to Closing the Gap, so it's wonderful to be working on this important project.

"The NSW partnership agreement, to which LGNSW is a signatory along with NSW CAPO and AANSW, has helped bring the Closing the Gap toolkit project to life.

"I look forward to working collaboratively with AANSW and the NSW CAPO teams and seeing councils engaging with the development and use of the toolkit over the next 12 months and beyond."