Prominent Cape York Aboriginal leader Noel Pearson says the Howard Government is making a terrible mistake by abolishing the Aboriginal and Torres Strait Islander Commission (ATSIC) and mainstreaming its functions.

Mr Pearson says Prime Minister John Howard is taking Indigenous affairs back to an era which clearly failed.

"This is complete folly. ATSIC was started up in 1990, the 20-years prior to that mainstreaming was the way in which services were delivered to Indigenous people and that produced failure," he said.

Former ATSIC head Dr Lowitja Donahue says Aborigines and Torres Strait Islanders will go back to marching on the streets and protesting on the steps of Parliament House.

"It will cause Aboriginal people to agitate once again like we did in the past," she said.

The Government is expected to introduce legislation into parliament next month to abolish ATSIC.