The federal government will hand back former defence land near Stokes Hill Wharf to Larrakia custodians as part of its national divestment.
Larrakia people have called for the land to be remediated, with heavy fuels and PFAS chemicals removed.
A large parcel of land at Howard Springs is also part of the defence divestment and has been earmarked for housing.
The federal government has been unable to say whether it will remediate heavy fuels and PFAS chemicals from a former Navy fuel storage base in Darwin city centre before it returns the land to Larrakia custodians.
The defence and finance ministers announced on Monday the government would give the former Stokes Hill Navy fuel storage site to the Larrakia people as part of its national divestment of more than 60 Defence sites to both raise and save money.
The 3.8 hectare site behind Stokes Hill Wharf was the Navy's main fuel storage base for its ships in Darwin from 1920, until seven of the 11 fuel tanks were destroyed by the Japanese bombing of Darwin in 1942.
The defence department stopped using the site in 2014 and declared it surplus to its requirements the following year.
The ABC understands the federal government has offered to return the site to the Larrakia Nation Aboriginal corporation.
