Australia's most populous state will reverse a decades-long ban on uranium exploration, with the regional government saying today it would be foolish not to tap into the lucrative sector.

Barry O'Farrell, premier of New South Wales, said the quarter-century ban would end so officials can "get the facts" about the extent of any uranium reserves in the state, home to Australia's biggest city Sydney.

Uranium is a key input for nuclear power.

"We'd be mugs (fools) in the current climate, given the revenue being generated in other states, given the jobs being generated in other states, not to do this step, which is to see what uranium resources exist across New South Wales," O'Farrell told reporters.

"Clearly we're a government that needs revenue in order to build the hospitals, the roads, the railways, the other infrastructure New South Wales needs.

"It would be stupid to turn a blind eye to the existence of resources in New South Wales," he added.

There are uranium mines in South Australia state and the Northern Territory but while uranium exploration is allowed in resource-rich Queensland, mining is banned there.

Western Australia, which has massive mineral wealth, currently has no uranium mines but a decision on a new project is expected this year.

Victoria will now be the only Australian state with a total ban on uranium.

O'Farrell's decision, criticised by opposition lawmakers and environmental groups, follows Canberra's lifting in December of a long-standing national ban on exporting uranium to India, opening up a huge new market.