A plan to close more than 100 of Western Australia's remote Indigenous communities will have severe consequences, the Premier says, but added his hands were tied.

Premier Colin Barnett revealed plans to close between 100 and 150 of the 274 remote communities in WA, saying they can no longer continue to service them.

The move sparked a backlash in parts of the Indigenous community, with Aboriginal elders leading a protest outside state parliament this afternoon over the plans.

About 50 people gathered as elders warned that closures of communities would only increase the existing social problems that those residents face.

Labor's Indigenous Affairs spokesman, Ben Wyatt, said it was dangerous territory and showed the Government had "given up" on the problem.

Later in Parliament, Mr Barnett admitted closing communities was not a good option but said the lack of a better one had tied the Government's hands.

"It will cause great distress to Aboriginal people who will move, it will cause issues in regional towns as Aboriginal people move into them," he said.

"But high rates of suicide, poor education, poor health, no jobs ... it's a huge economic, social and health issue.

"They [the smaller remote communities] are not viable and the social outcomes, the abuse and neglect of young children, is a disgrace to this state ... this is the biggest social issue this state faces."

The possible closure comes amid Federal Government funding cuts for remote Indigenous communities.

The Commonwealth was the major funder of around two thirds of the state's Indigenous settlements - with the state funding the rest -but that responsibility is being transitioned to the states over the next two years.

When it was announced in September, the state described the Federal Government's move as "reprehensible".

According to the Department of Aboriginal Affairs, of the 12,113 Aboriginal people currently living in 274 communities in WA, 1,309 Aboriginal people are in 174 of the smallest.

Across 115 of those communities, there are 507 people in total, or an average of 4.4 people per community.

According to the Australian Bureau of Statistics's 2011 census, there were 69,665 Aboriginal and Torres Strait Islander peoples living in Western Australia.

No choice as Commonwealth 'vacated the territory'

Mr Barnett said the Government was still working out the finer details of what it would do.

"The State Government has not yet worked out how we'll handle this but we accept we have no option to accept the responsibility of dealing with this situation," he said.

"It's a very complex and difficult situation for the Government to handle but we have no option to handle it because the Commonwealth has vacated the territory."

The move is not without precedent, with the Government in recent years shutting down and moving to demolish the remote East Kimberley community of Oombulgurri after a string of social problems.

The previous Labor Government also shut the Swan Valley Nyungah Community in the early 2000s after a series of sexual abuse incidents and mental health problems, some of which were linked to community leader Robert Bropho.

Bella Brohpo, who lived in the Swan Valley community, warned at Wednesday's protest that further closures would be devastating.

"Closing down these communities will only make more people homeless and despair," she said.

"The way we choose to live, it should be our choice and we shouldn't have domination of Government people telling us how to live or where to live.

"The [former Labor] Geoff Gallop Government and today Colin Barnett don't care a damn."