The Northern Territory government has become the first jurisdiction in Australia to raise the minimum age of criminal responsibility from 10 to 12 years.
The new laws passed by parliament overnight mean children aged 11 years or younger who commit offences will no longer be charged by police or imprisoned.
They will instead be referred to family support and intervention programs and placed in temporary accommodation if their homes are deemed unsafe.
Attorney-General and Justice Minister Chansey Paech says the NT is "taking a smarter approach to youth justice" and would break the cycle of reoffending.
"Our focus is on delivering proven solutions that will benefit all of our children, their families and the Territory as a whole," he said on Wednesday.
The North Australian Aboriginal Justice Agency welcomed the "momentous" changes, saying the NT's tough on crime approach over the past two decades had failed vulnerable children.
The agency said research showed that locking up children increased the risk of reoffending with more severe behaviour likely.
It also said the majority of children aged 10 and 11 who had been incarcerated on remand did not receive a custodial sentence for their offences but were subject to the "trauma we know the loss of liberty inflicts on the human psyche".
The Office of the Children's Commissioner NT also commended the amendment, saying it was a step in the right direction.
"A majority of the children finding themselves in detention have experienced trauma and grappled with living below the poverty line, Acting Commissioner Nicole Hucks said.
"More meaningful responses are needed to support children and their families to have their basic needs like housing and food security met."
The agency and commissioner's office both said the government should further invest in community leadership to address issues of youth offending.
They also called for the age of criminal responsibility to be raised to 14, in line with United Nations, international and medical expert standards.
The NT government stressed that police would continue to investigate offences after the amendments came into effect in late 2023.
Victims of crime would continue to receive assistance through financial compensation and support, it said.
Mr Paech said the changes were informed by recommendations from the Royal Commission into the Protection and Detention of Children in the NT.
The legislation will be reviewed by government in two years.