Northern Territory chief magistrate Hilary Hannam says the pendulum has swung too far towards protecting Indigenous culture, at the expense of the basic human rights of indigenous children.
Ms Hannam will soon leave the territory to take a seat on the Family Court.
She says the Aboriginal and Torres Strait Islander Indigenous Child Placement Principle, one of the key national policies in Aboriginal child welfare, is not always consistent with the best interests of Indigenous children.
"It seems to me that the placement principle is taken to the nth degree and even though the principle says it must be consistent with the best interest of the child, I'm concerned that there is too great an emphasis on the cultural interests of the community and the family rather than the child's best interests, which relate to basic human rights," she said.
The ABC reports the ATSI child placement principle applies in every state and territory and is designed to preserve Indigenous children's connection to their culture.
Broadly, it means that when a child needs foster care, priority will be given first to a place within the extended family, then within the child's community, then with an Aboriginal or Torres Strait Islander family, and only then - if no other option is available - with a non-indigenous family.
Ms Hannam said the way the principle is applied means Indigenous children are being discriminated against.
"The reality is that Indigenous children will be returned to family or extended family or even to Indigenous people generally as if that is always consistent with their best interest," she said.
"Overall there's a conception in the community that culture is more protective than it necessarily is'' she said.
"Those children are entitled - as a matter of human rights law - to maximise their chances of development, to reach their full potential.
''If we are saying that all sorts of standards, whether it is education, health, housing, protection from harm or exposure to violence is a different standard for Aboriginal children than for non-Aboriginal children, particularly remote children, then we are discriminating against them.
"We are much more concerned about assuaging our own guilt about our own history and failing to come to terms with our own history,'' Ms Hannam.
"If we put to one side that these are Aboriginal children, and we're actually looking at the reality of what they're being returned to, we would not accept that standard for our own children. So why should we for Aboriginal children?"