Education Minister Sarah Mitchell said creating a stronger career path for classroom teachers which better rewards performance was key to modernising the education system and attracting more people to the profession.
"This is about finding new ways to work with the profession to recognise excellence," Ms Mitchell told reporters on Thursday.
Under a new plan led by education expert John Hattie, key stakeholders and teachers will enter talks to develop a new pay model to modernise the education system, Ms Mitchell said.
The purpose of Professor Hattie's review will be to learn how to "bring a level of prestige to the teaching profession that our teachers so deserve", Ms Mitchell said.
"There is not a profession in the world, where every day you literally shape the lives of the next generation and it's incredibly rewarding.
"I haven't met a teacher who hasn't entered the profession because they want to make a difference and have a positive impact on the children in their classroom.
"But what I hear too often is that they feel that they do hit a bit of a ceiling when it comes to their salary."
Ms Mitchell said many teachers felt that to make financial strides, they had to move into administrative roles in the department or become principals.
"We also need to find opportunities for people to be able to stay in the classroom and do what they love and to be rewarded for their excellence," she said.
The education minister also said she would like to see an existing highly-accomplished and lead teacher certification increase by tenfold but insisted it would not be about introducing performance pay.
Prof Hattie is expected to deliver his advice later this year before the government works to implement the changes.
"The rewarding of excellence and expertise is the right topic to realise high standards and maximise positive impacts on students," Prof Hattie said.
Ms Mitchell said she had also had positive talks with her federal counterpart Jason Clare about attracting more people to the teaching profession.
Teachers in NSW start on a salary of $73,737, which increases to a maximum of $117,060 if they gain accreditation as "highly accomplished" or lead teacher, while assistant principals get $126,528.
The announcement comes a day before the nation's education ministers meet to discuss the ongoing issue of chronic teacher shortages.
NSW teachers' unions are at loggerheads with the Perrottet government over pay and staff shortages they say have led to unmanageable workloads.
Public school teachers have walked off the job three times this year, and NSW Teachers Federation president Angelos Gavrielatos says the crisis is putting the state's education future at risk with some 3800 teachers needed by 2027.
The unions want a pay rise of five to seven per cent, while the NSW government has offered three per cent.
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