The trial will be devised by a working party that will report back to the government by the end of the year, Premier Mike Baird announced on Tuesday.

Unveiling the government's much-anticipated response to the issue during question time, Mr Baird also said the existing NSW police discretion to not charge terminally ill adults if they are caught using cannabis for pain relief would be formalised through new guidelines.

It is understood that as part of the change a register of terminally ill patients and their carers will be established.

"We want to give the terminally ill and those around them – their carers, their family – greater peace of mind," Mr Baird said.

"We also want to ensure carers aren't forced to watch their loved ones suffer when their pain can be alleviated."

Mr Baird said the clinical trial would "explore further the role cannabis can play in providing relief for patients suffering from a range of debilitating or terminal illnesses".

The issue gained momentum earlier this year when Nationals MP Kevin Anderson announced he would introduce a private member's bill to legalise cannabis for medical use.

One of Mr Anderson's constituents, 24-year-old Dan Haslam, has been using cannabis to relieve nausea associated with chemotherapy to treat his terminal cancer.

Mr Haslam's mother, Lucy, was in the public gallery to hear Mr Baird's announcement and said she and her family were "thrilled to see the government has listened to the overwhelming support for decriminalising medicinal cannabis".

However, she noted there was "a long way to go. Legislation to regulate the supply and distribution process will still need to come forward, and there's steps the federal government needs to take, too.

"But this is the start of a new era in Australian drug policy."

Earlier on Tuesday, Labor announced it would offer bipartisan support for the NSW legalisation. It promised to take the policy to next year's election if the government did not change the law before.

Labor supports the recommendations of the select committee into the use of cannabis for medical purposes, which reported in May last year.

One was that the government amend the Drug Misuse and Trafficking Act to add "a complete defence" to the use and possession of cannabis for medicinal purposes.

A committee member, Labor MP Adam Searle, said he was disappointed with the government's announcement because a clinical trial was no substitute for immediate action and, if done properly, would take years to provide its data.

"The Premier and his government are hiding behind process at the expense of the suffering of people who need access to cannabis for medical purposes now," he said.

Greens MP John Kaye, who is proposing his own bill in the upper house, said Mr Baird's clinical trial would take years and the announcement was "a timid and flawed tiny step forward".