NSW has become the first state to agree with the federal government on funding for the full-scale operation of a National Disability Insurance Scheme (NDIS) in six years' time.
Prime Minister Julia Gillard and Premier Barry O'Farrell announced on Thursday they had come to terms for the money to support disabled people, carers and their families in the country's most populous state.
More than $6 billion a year will be provided from 2018/19.
"The commonwealth and the state will share around half of the burden," Ms Gillard said.
The federal government would contribute 51.4 per cent of the total cost of the NDIS in NSW from 2018/19 - or $3.319 billion - while NSW will put in $3.133 billion.
"We have worked hard on this arrangement together and I want to thank Premier O'Farrell for his leadership and for being the first premier to enter such an agreement with the federal government," she said.
"I do want to reinforce that this deal now sets the benchmark.
"It shows to the other states and territories that it can be done and I am determined that it will be done."
Mr O'Farrell said the deal would help about 120,000 people in NSW.
"This delivers to them the NDIS, which has long been sought after," he said.
The premier was proud NSW was the first state to strike a bipartisan "fair and appropriate" deal with the federal government.
"This should be above politics and I think this agreement today demonstrates this is above politics," Mr O'Farrell said.
"This will ensure that for those families, those individuals, those carers who are affected by disability, that this long-term support beyond the launch will continue."
Ms Gillard said both the Commonwealth and NSW would need to make some tough budget choices to accommodate the funding requirement.
"I want people to understand we will be asking people to be making some hard choices to get this done," she said.
"But I am determined to do it. Premier O'Farrell is determined to do it," she said.
Mr O'Farrell said NSW had $2 billion worth of growth funding waiting for the scheme.
Asked whether she was having the same conversations with the other states, Ms Gillard said, "I'm not giving the call of the card or running commentary about negotiations."
"But what today shows is that you can get it done."
Ms Gillard ruled out imposing a Medicare-style levy on Australians to pay for the NDIS.
When fully operational, the NDIS is expected to cost up to $15 billion a year.