The hunt is on for a new home for the world's rarest marsupial, the Gilbert's potoroo, off Western Australia's south coast.

Islands off Esperance are among areas being assessed for their suitability for the critically endangered species.

The marsupial was believed to be extinct until a small population was discovered at Two Peoples Bay near Albany in 1994.

Since its rediscovery, efforts to safeguard that stronghold population of about 40 animals have suffered several setbacks, and the species is on the brink of extinction.

The population at Two Peoples Bay Nature Reserve plummeted to an estimated six potoroos after bushfires razed 90 per cent of the mammal's habitat in 2015.

Gilbert's Potoroo Action Group chairman Ron Dorn said the area could be uninhabitable for potoroos for up to 20 years.

Hard to find a new home

The first translocated colony established in 2005 on Bald Island, off the coast of Albany, is thought to have reached saturation point at about 60 animals.

Carpet pythons have been a problem at a second translocated population established within a fox and feral cat-free enclosure at Waychinicup National Park in 2010.

Last year, Michaelmas Island, off the coast of Albany, was chosen for a third translocation effort.

Hopes were high a small number of potoroos might thrive on the island, but two of the four potoroos died, according to the Department of Parks and Wildlife (DPaW).

"We found that potoroos stayed out of the limestone terrain and stayed only on granite, which occupies only a third of the island," a DPaW spokesperson said.

"As the two rescued potoroos were very thin, it appears there was not enough food to sustain them."

The two male potoroos were captured, held in captivity until they regained their lost weight, then released in unburnt bushland at Two Peoples Bay Nature Reserve.

"Monitoring has shown that they are doing well and that each of them has settled close to a female mate," the DPaW spokesperson said.

Finding the perfect potoroo habitat

The potoroo population was devastated by bushfires near Albany in 2015. ( ABC News: Kendall O'Connor )

As well as preferring granite over limestone, potoroos are fussy eaters, with truffles making up 90 per cent of their diet.

The island chosen for the next translocation must be big enough to support a viable breeding colony, have an abundance of food, and be free from foxes, cats, rats, mice and pythons.

"They really make it very tough for us to help them survive," Mr Dorn said.

He hopes the perfect potoroo haven could be among the Recherche Archipelago, a group of 105 islands between Esperance and Israelite Bay.

Funding boosts efforts to save marsupial

DPaW anticipates it will take about a year to assess islands for their potential to support potoroos.

"If there is very good evidence that suitable cover and food are plentiful and that the risk of predation is sufficiently low, the earliest transfer of animals would be in winter 2018," the DPaW spokesperson said.

The latest attempt to boost the potoroo's offshore population and improve the species' chances of survival was allocated $250,000 in Federal Government funding last year.

The Gilbert's Potoroo Action Group received the funds after Gilbert's poto roo was added to the National Threatened Species trajectory list in 2016.

The Threatened Species Strategy Action Plan, launched in 2015, aims to protect 20 Australian mammals most at risk of being wiped out.

This week, federal Environment Minster Josh Frydenberg included the Gilbert's potoroo on a prospectus inviting businesses and philanthropists to donate $500,000 over three years towards conservation efforts.