Prime Minister Anthony Albanese revealed the plan to help save the greater bilby on Thursday after meeting two of the iconic Australian marsupials in Sydney.
The strategy draws on First Nations knowledge and involves management by traditional owners to remove feral species and repair bilby habitats.
"Theses beautiful animals are Australia's answer to the Easter Bunny," Mr Albanese said.
"Unfortunately over the years bilby populations have shrunk considerably."
Once inhabiting two-thirds of land mass, bilby populations are now reduced to just 15 per cent, largely in Central Australia.
The federal government will invest more than $5 million in bilby protection programs, with environment ministers in the Northern Territory and every mainland state except Victoria signing on to the plan.
Much of the work will take place in Central Australia, including fencing off areas where bilby populations can grow, free from feral species.
The idea of the Easter bilby arose almost three decades ago to raise awareness about the plight of the species which competes with introduced rabbits for food and burrows.
Other threats to its survival include habitat loss and introduced predators like cats and foxes as well as fire.
Environment minister Tanya Plibersek said with the right protection, bilbies can remain a beloved Easter icon for generations.
"That means tackling threats like rabbits, an invasive animal whose eating and digging threatens over 300 native species," she said.
"In the lead up to Easter, if you can choose between an Easter bunny and an Easter bilby, make sure you choose the Easter bilby."
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