An infectious diseases expert has cast doubt on claims that children from the Stolen Generations were used in medical experiments.

Aboriginal elder Kathleen Mills has told a Senate Inquiry in Darwin that early last century Indigenous children in the Northern Territory were used to test a leprosy serum.

But Warwick Britton from the University of Sydney says Ms Mills may be referring to a special treatment used on leprosy patients.

"There may well be an oral tradition of Aboriginal leprosy patients being injected," he said.

"These injections with chaulmoogra oil were quite painful and they were given every month or two months and it is possible that this has been misunderstood as some kind of guinea pig therapy."

Dr John Hargreaves, a doctor who treated leprosy in the Northern Territory for decades, also cast doubt on the claims.

He says he has already looked at the records and found no evidence of such treatment.

He agrees the confusion may stem from the use of chaulmoogra oil.

"It might have been confused or thought of as an experimental treatment, but it was not," he said.

"It was in fact the only treatment that was available at that time."

Immediate investigation

The Federal Government has ordered an immediate investigation.

Federal Health Minister Nicola Roxon says it is the first time the Government has heard of the allegations and she is taking them seriously.

"I don't know what the files will show us but what I want to do is make sure that we quickly find out anything that is on the Commonwealth's Health Department records," she said.

"We certainly want to be able to ascertain if there's anything that's been done by the Commonwealth or others that's revealed in those records.

"It will be of course a very serious matter to take further."

Meanwhile, the Federal Opposition has backed an investigation into the claims.

Opposition's health spokesman Joe Hockey says it is possible that the claims are true.

"Given that apparently leprosy was rife in the 1920s and 1930s across all populations, anyone who is looking for a treatment for a significant disease would take advantage of anything that is offered," he said.

During today's hearing into the Stolen Generations Compensation Bill in Sydney, Tasmanian Senator Guy Barnett raised the issue of the leprosy testing allegations.

"It's a deeply disturbing allegation and it's something that needs to be taken in the most serious manner," he said.