Lizzie Blandthorn, who took over the planning portfolio last month, is the sister of Hawker Britton director John-Paul Blandthorn.
Hawker Britton's clients include construction company John Holland, which is tasked with building the West Gate Tunnel, Mirvac, the Dennis Family Corporation and Melbourne Airport.
The Andrews government on Thursday confirmed Hawker Britton has been advised the minister will exclude herself from decision making involving the firm.
"In relation to the administration of the planning portfolio, there will be no contact between Hawker Britton and the minister, or her office," a government spokesperson told AAP in a statement.
An alternate minister will be delegated to make decisions where there is a risk of potential conflict, but they and their office will also not have any contact with Hawker Britton on planning matters.
There will also be no contact between Hawker Britton and the Department of Environment, Land, Water and Planning.
"The minister looks forward to continuing to work with local communities to deliver the best planning outcomes for Victorians," the spokesperson said.
Ms Blandthorn has the power to make decisions around planning permits and land rezoning, but the state government said after her appointment there would be arrangements in place to ensure any potential or perceived conflicts of interest were managed.
"All ministers are expected to act with integrity as they manage their portfolios to deliver the best outcomes for Victorians," a government spokesperson said at the time.
Opposition planning spokesman Ryan Smith on Thursday described the government's statement as "bizarre".
He said there were a dozen portfolios Ms Blandthorn could have been appointed to, yet Premier Daniel Andrews gave her the one "most designed to cause conflict and confusion".
"The government then twists itself in knots to suggest that an alternative minister will deal with issues of conflict with Hawker Britton, although they and their department also won't be dealing with them," Mr Smith said.
"With Andrews and his government mired neck-deep in corruption allegations, this is yet another example of why the public's trust in this government is at record lows."
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