The Federal Opposition is demanding a Senate inquiry into Government plans to dismantle the Aboriginal and Torres Strait Islander Commission (ATSIC).

The Labor Party supports the abolition of ATSIC but says the Government's legislation contains unacceptable changes to the administration of Indigenous affairs such as the transfer of Indigenous programs to mainstream agencies.

Labor's Indigenous affairs spokesman Kerry O'Brien says the inquiry will give Indigenous Australians the opportunity to have a say on the Bill.

"[The Bill] creates significant power for the Minister, it creates new powers for some organisations so we believe that this warrants significant examination," he said.

"I will be moving at the first opportunity to refer this legislation to a Senate committee."