Labor has been returned to power in the ACT after sole Greens MLA Shane Rattenbury decided to back the party for a fourth term.

Labor and the Canberra Liberals have eight seats each in the new Legislative Assembly, leaving Mr Rattenbury holding the balance of power.

Both parties have spent the week negotiating with Mr Rattenbury in a bid to secure his support.

The Greens supported Labor in minority government over the past four years.

Mr Rattenbury has now signed another parliamentary agreement with Labor returning Katy Gallagher as chief minister.

Under the deal Mr Rattenbury will be appointed a minister.

The agreement also includes nearly 100 policies, initiatives and reforms to be implemented over the next four years.

The major policies include progressing a light rail network in Canberra, cleaning up Canberra's lakes, meeting the ACT's climate change targets, implementing the Gonski education reforms and reducing homelessness through the Common Ground project.

Mr Rattenbury says he did have constructive conversations with the Canberra Liberals.

"The Canberra Liberals put forward some interesting ideas on policy. However, particularly on the big ticket items, Katy Gallagher outlined a more substantial agenda," he said.

"A closer policy alignment will result in a more productive and stable government for the ACT, another important consideration in my deliberations.

"I also believe it would be irresponsible to form government with a party that is committed to unpicking progressive tax reforms. These reforms will put the ACT on a solid financial footing for the next two decades and it's fiscally irresponsible of the Liberal Party to ignore this."

Mr Rattenbury says he will support the Liberal Party to elect a Liberal Speaker to the Legislative Assembly.

"My deliberations this week have been all about what is the best for all Canberrans and not for those people who simply voted Green and not even for those people who voted Labor or Liberal, but about what is the best for the future of this city," he said.

"My decision about who to form government with was based on good policy and the capacity to deliver stable government in the ACT over the next four years."

Sorry, this video has expired Shane Rattenbury backs Labor

'Stable government'

Chief Minister Katy Gallagher has thanked Mr Rattenbury for his support.

She says the new arrangement will ensure good stable government.

"I commit myself wholeheartedly to serving the Canberra community to the best of my ability," she said.

"Now comes the time to knuckle down and make the people's verdict work."

Ms Gallagher says she is going to move to have six ministers in the Assembly.

"I've taken some advice on how to do that, you do have to amend legislation so there is process that we need to go through that will allow us to have another minister appointed down the track," she said.

"But in the meantime Mr Rattenbury will be joining the Cabinet."

She says she is committed to implementing her party's vision for Canberra.

"It's an optimistic and ambitious agenda but at its core is a desire to set this city free of some of the constraints of the past and to allow us to fulfil our destiny as a city state less depended on the Commonwealth," she said.

"It's a vision that will see us cement ourselves as the natural economic and service hub of the region."

Ms Gallagher says Labor is listening to voters and hopes to work more cooperatively with the Liberals.

"My hope out of all of this is that we don't disintegrate into an us versus them. That we are able to work more collaboratively and share ideas and genuinely implement them if they're going to be in the long term interests of the city," she said.

Sorry, this video has expired Katy Gallagher on returning to power

'Very disappointed'

Canberra Liberals Leader Zed Seselja says the party is very disappointed.

"We were hoping to form a government, that will not be the case," he said.

"The Liberal party is disappointed, I'm disappointed, and there will be many tens of thousands of Canberrans who are also disappointed."

Mr Seselja says another four years of a Labor government will not be good for the Territory.

"I don't believe that our health system will be fixed, I don't believe that people's cost of living will be addressed and I don't believe local services will be fixed in the way that they should," he said.

He says he does not think his refusal to offer Mr Rattenbury a ministry affected the outcome.

"Shane Rattenbury is part of the government," he said.

"I made the point on election night that that people didn't exactly embrace at this election the Labor-Greens coalition and that I thought it would be a mistake for them to respond by going into a closer coalition.

"That's what they've chosen to do, that is their choice, but obviously they are now part of the government."

The Canberra Liberals received 41 more first-preference votes than Labor at the October 20 poll.

"This will be the first time in the Territory's history that the party which received the most votes from the electorate doesn't have the opportunity to form government," Mr Seselja said.

"To those people in Canberra who did want to see a change in government, I would say don't be disheartened.

"We will continue to work to serve you. We are a strong team, the biggest Liberal team ever to serve in the ACT Legislative Assembly."