Ngurra - meaning "home", "country" or "place of belonging" - will be built on the shores of the capital's Lake Burley Griffin between Old Parliament House and the Australian War Memorial.

An architectural design competition will be run in 2022 to develop a design that reflects Indigenous Australian's aspirations, achievements and connection to country.

The $316.5 million facility will include a learning and knowledge centre and a national resting place to care for Aboriginal and Torres Strait Islander ancestral remains.

It will also be the new home for the Australian Institute of Aboriginal and Torres Strait Islander Studies (AIATSIS).

In a statement Prime Minister Scott Morrison said the new cultural precinct would be a place of national pride and significance.

He said Ngurra was the realisation of a long-held desire to have a home for Aboriginal and Torres Strait Islander cultures and histories in the national capital.

"This new world-class facility will contribute to our continuing journey of reconciliation, where Indigenous Australians can tell their stories, in the way they want, for all visitors to have a greater understanding of our shared history," he said.

Minister for Indigenous Australians Ken Wyatt said the precinct would provide a new perspective and be a place where the diversity of one of the world's oldest living cultures will be celebrated.

The announcement comes as the 50th anniversary of the Aboriginal Tent Embassy on the lawns of Old Parliament House looms.

The embassy was established by protesters on January 26, 1972 to bring attention to Indigenous land rights and sovereignty.

Australian Associated Press