NSW Premier Gladys Berejiklian has issued an ultimatum to her Nationals colleagues after they threatened to sit on the cross bench because of a dispute over the state's koala protection policy.
Ms Berejiklian was blindsided by the loss of her coalition partner on Thursday, and gave Nationals MPs the choice of declaring support for her government of being sacked from cabinet.
In a media statement she said "it is not possible to be the deputy premier or a minister of the Crown and sit on the crossbench".
Ms Berejiklian said Nationals Leader John Barilaro and his ministerial colleagues had until 9am Friday to indicate whether he wished to remain in her cabinet or sit on the crossbench.
"If required, I will attend Government House tomorrow and swear in a new ministry," Ms Berejiklian said in the statement.
"It is long-established convention that members of cabinet must support government legislation."
The ultimatum forced the NSW Nationals into an emergency partyroom meeting on Thursday night. However, MPs reportedly failed to reach any resolution, but would maintain discussions ahead of Friday's deadline.
Mr Barilaro announced the cross bench threat after another partyroom meeting on Thursday morning, saying changes to the Koala Habitat Protection State Environmental Planning Policy are "wrong" and hurt landowners and farmers.
"We will be abstaining from voting on government bills," he said.
"By not voting or abstaining from voting from government bills we're effectively on the cross bench."
He said Nationals MPs also wouldn't attend joint party room or leadership meetings until the issue is resolved.
However, he added Nationals ministers won't be surrendering their portfolios.
The Nationals are concerned the policy limits land use on farms and the ability to rezone areas for development as more trees are classed as koala habitat, which will restrict the clearing of land.
"The National Party stands for a thriving koala population," Mr Barilaro said.
"We actually want to see the population double. We are not anti-koala.
"This is somehow a way to sanitise the regions, attack the property rights of landholders and do absolutely nothing to support koalas."
The Nationals have proposed several changes to the policy including ensuring there is a reasonable definition of highly suitable koala habitat, separating private native forestry from the proposal and operating rural regulated land and agricultural production separately.
NSW Labor leader Jodi McKay accused Mr Barilaro of "blowing up the coalition" during some "extraordinary scenes" at the press conference.
She called on the premier to front the public to confirm the status of her government.
"It is my belief that the government is no longer functioning," she told reporters.
Independent MP Justin Field urged the premier to hold her line and stand up for nature and koalas.
"This is just another ideological political attack on our environment by the National Party whose policies are destroying our rivers and forests," Mr Field said in a statement.
Nature Conservation Council chief executive Chris Gambian accused the Nationals of dictating environmental policy in the state for a decade.
"The koala policy is one small measure to ensure koalas don't become extinct in NSW by 2050," he said in a statement.
NSW Liberal Catherine Cusack earlier blasted Mr Barilaro and called for his resignation.
"This is an excellent government ... but we can't continue on this track that he's put us on," she said.
The Nationals have 13 lower house MPs, while the Liberals have 35 and Labor 36.
In the upper house, the Nationals have six, the Liberals have 11 and Labor has 14.