Prime Minister Julia Gillard and Tasmanian Premier Lara Giddings have signed a multi-million dollar assistance package for the state's forest industry.

The agreement finalises a $276 million deal to help the state move out of native forest logging.

In an address to Tasmanian Labor delegates at the party's state conference in Launceston, Ms Gillard said the agreement will provide a path forward for Tasmania's economy.

She said the agreement responds to changing market conditions.

"Tasmania needed to face up to the challenge of further diversifying its economic base and at the same time, there was a major opportunity here to secure new forest reserves and better protection for some special areas of the forests in Tasmania," she said.

Ms Gillard told delegates she hopes the package will end years of conflict.

"The state's been divided, sometimes bitterly, for decades," she said.

"There is a genuine chance now to heal that divide. Not to abolish democratic differences, but to end the social conflict."

The deal will see 430,000 hectares of native forest put into informal reserves, including areas such as the iconic Styx Valley, Upper Florentine, Tarkine and Great Western Tiers.

Some $85 million will be provided to struggling forest contractors and $43 million to facilitate the protection of new areas of high conservation forest.

The Premier says she believes environmental groups will support the signed agreement.

"This is probably one of the first times, if ever, that we've had a process occur where environmental groups have stuck with that process to the very end day," Ms Giddings said.

"In the past what we've found when we have engaged environmental groups, that they have walked away from the process prior to that process being completed."

Ms Gillard says she expects the Greens will also back the deal.

"This is attaining the outcomes that they have long sought, that is, better protecting a large section of forest, including a very important areas that have been the subject of long campaigning, like the Styx and the Tarkine and the Huon," she said.

But the Forest Industries Association of Tasmania is angry the final agreement no longer includes provisions to protect wood supply.

The association's Terry Edwards says forest workers have been sold-out.

"We will do everything we can to oppose this agreement at every possible place we can," he said.

"We will work with the liberal opposition both in Canberra and in Hobart and we will work with the Legislative Council and we will do everything that we can to destroy this agreement."