In submissions to be heard later this week, NSW Young Labor recommended the state legalise the consumption of cannabis and to legalise the possession of cannabis for personal use for those aged 18 at over.
It called for NSW to follow the model of the ACT in allowing adults to possess and grow two cannabis plants, with a maximum of four per household.
In considering the drug's regulatory framework, the party's youth wing argued the government's "highest priority" should be health outcomes and harm minimisation, putting it at odds with the broader party's pro-criminalisation stance.
"The medical truth is that cannabis is no more harmful for an individual than currently legal substances, including alcohol and tobacco," the submission read.
The Labor party offshoot called for extreme caution when implementing any policy as well an evidence-based approach that drew on lessons from both the ACT and abroad.
"A robust framework for producers and sellers of recreational cannabis would be required, as well as strict rules dictating how it can be advertised and packaged," it said.
Legalising and taxing cannabis has the potential to generate hundreds of millions of dollars of yearly tax revenue in adding an additional revenue stream to the state's struggling coffers, the organisation said.
Submissions on behalf of the NSW branch of the Royal Australian College of General Practitioners, Legal Aid NSW, the Alcohol and Drug Foundation as well as the NSW Council for Civil Liberties all supported decriminalising the possession of cannabis for personal use.
The Minns Labor government has shown no indication it will be moving towards legalising cannabis but did shift on decriminalisation by allowing more drug users caught by police to be managed in health programs.
Premier Chris Minns pledged to host a drug summit this year where MPs and experts will consider the legalisation of cannabis, the use of pill-testing sites and other harm-reduction measures.
The NSW Council for Civil Liberties described the summit as an opportunity to recast the problematic use of drugs as a matter of public health policy.
"It must also be an opportunity to examine the structural reasons driving drug misuse and dependency," the council said in a submission.
The Alcohol and Drug Foundation noted cannabis remains the most commonly used illicit drug in Australia.
Regulatory framework has been "ineffective, costly and disproportionately impacts those people who are detected with cannabis for personal use, rather than suppliers" it said while noting its failure to reduce the drug's use and availability.
South Australia, the ACT and Northern Territory have decriminalised cannabis by applying civil penalties, if a person meets certain eligibility criteria.
The Royal Australian College of General Practitioners noted evidence base for the use of medicinal cannabis products is "limited and inconclusive" while calling for further research and guidelines to support GPs.
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