Shine Lawyers' special counsel Caitlin Wilson is leading the class action on behalf of the families.
Ms Wilson said the families allege there has been widespread racial discrimination across a number of state governments, resulting in the removal of Indigenous children from their families and a loss of cultural connection.
"First Nations children are consistently and significantly over-represented in out of home care, and at the present time, Western Australia boasts the highest rate of over-representation in the country," she said.
Megan Krakouer said there's an urgent need for reform in the child protection system. (Richard Wainwright/AAP PHOTOS)
"This class action alleges that this is largely because of the discriminatory conduct of the department throughout each of the various entry points into the child protection system,."
Ms Wilson said many of the families the law firm has spoken to liken themselves to a modern-day Stolen Generation.
"We do not move forward by repeating mistakes of the past," she said.
"Connections to culture and community must be preserved for these families. This class action aims to mark the beginning of the end to this unjust and unnecessary separation."
Shine client and mother of four Sarah had her children taken into state care when they were young.
Her eldest three children who are now 20, 19, and 18, were placed in care for seven years, while her youngest, aged 11, was taken five days after birth and remained in care for nine months.
During their time in state care, one of Sarah's children was subjected to sexual abuse, the law firm says.
Sarah worked toward reunification and had her parental rights reinstated, with all four children now back in her care.
However, rates of reunification are low, with only seven per cent of Indigenous children reunited with their families in Western Australia, and just two per cent in NSW.
National Suicide Prevention and Trauma Recovery Project director Megan Krakouer has supported a number of families who have experienced the removal of children.
She welcomed the class action, saying there's an urgent need for reform in the child protection system.
"This legal action is vital in addressing the grave injustice faced by our First Nations people," Ms Krakouer said.
"We are not an industry - our children are not statistics. The time to act is now."
"I have witnessed too many tears of families, of children, the power imbalance, and cultural theft. For every 10 children removed, only one is reunified. This is the Black struggle."
Shine is also investigating child removals in Victoria and South Australia.
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