Deputy Chief Minister Gerard Maley said the government had come up with a three-point plan to reduce overcrowding, build long-term infrastructure and focus on rehabilitation.
"I make no apologies for the tough decisions we have to make to fix this mess," he said.
The plan includes moving children from the Alice Springs Youth Detention Centre to Darwin and converting the facility into a women's prison.
They also plan to move 200 prisoners back into the existing Don Dale Youth Detention Centre, which was originally Berrimah adult jail before being decommissioned in 2014.
The government confirmed children will be moved out of the dilapidated Don Dale before adults are held at the site in early November.
Commissioner Matthew Varley says there has been unprecedented growth in the NT's prison population. ((A)manda Parkinson/AAP PHOTOS)
Corrections Commissioner Matthew Varley said the infrastructure investment would immediately reduce the use of police watch houses, particularly Palmerston station, and relieve pressure on the growing demands.
"We have seen an unprecedented growth in prison population over the last couple of years... almost a 400 person increase, which puts incredible pressure on our staff and our facilities," he said.
With an additional 1000 beds by 2028 it takes the total number of people potentially incarcerated in the NT to above 3000.
"If we've got 3000 people in custody in the (NT) it's a sad state of affairs, and I certainly will work with the justice sector ... to make sure that we're doing everything we can to reduce recidivism rates," Mr Varley said.
Initial costings will be be redistributed from the current budget, but Mr Maley was unable to put a dollar figure on the plans, which include building several new facilities
During debates last week members from the government reiterated its plans were not about "locking more people up" but rather intervening early to "keep the Territory safe".
Clinton Howe, MLA for Drysdale, said it is "disingenuous" to suggest the government's repeals of the minimum age of criminal responsibility, boast-and-post laws and ram raid legislation were going to lead to more children in prison.
"We are trying to intervene to get the best outcome for a child early," he said.
On Friday, less than 24 hours after lowering the age of criminal responsibility, the government, sent a letter to youth justice agencies announcing it would "wind back" its most significant youth diversion program.
In emails seen by AAP, the Department of Territory Families said Back On Track program will stop taking "some referral types" by 1 November following a review.
The letter said the Department of Corrections, who absorbed youth justice following the election, will begin creating a "new and improved youth diversion program" but provided no date as to when it will be available for referrals.
Legal and social services said they are concerned without a functioning diversion program young people will be sent directly to jail.
Some service providers told AAP they are concerned the "new and improved" services will be boot camps.
Justice Reform Initiative executive director Dr Mindi Sotiri said the proposed plans were deeply troubling and would mean children from central Australia would be sent to Darwin.
"It would be a monumental injustice to remove children who come into contact with the criminal justice system families, support networks, community and country in central Australia," she said.
"This is short-term, knee-jerk policy making."
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