Premier Dominic Perrottet says legislation will be introduced to parliament this week that would deny parole to murderers unless they disclose the location of their victim's remains.
The laws would affect about six prisoners in NSW jails.
"We will make it impossible for offenders who wilfully and deliberately refuse to disclose information about their victims' remains to be granted parole," he said in a statement on Tuesday.
The bill has been dubbed "Lyn's law" after former Sydney teacher Chris Dawson was convicted last month of murdering his 33-year-old wife Lynette, who disappeared from their Northern Beaches home more than 40 years ago.
The body of the mother of two has never been found and a petition has been launched lobbying for the reform.
The premier said he hoped the legislation would comfort grieving families.
"Being unable to locate a loved one's body is extremely distressing and traumatic for the families and friends of victims and it denies a victim the dignity of being laid to rest appropriately," he said.
"These laws are to stop inmates convicted of murder or homicide offences from getting parole unless they co-operate with police to end the torment of families and return to them the remains of their loved ones."
The reform will mean the State Parole Authority cannot grant parole unless it concludes the offender has co-operated satisfactorily in identifying the victim's location.
The authority will rely on written advice from the police commissioner and other relevant information to determine whether the offender has co-operated.
Corrections Minister Geoff Lee said the reforms were modelled on laws in other jurisdictions and would apply to all current and future inmates in NSW to capture convicted offenders who have not yet been considered for parole.
"Any offender in prison coming up for parole should really think hard about maintaining their refusal to co-operate with police if they want to retain their prospects of getting parole," Dr Lee said.
The legislation will bring NSW into line with similar laws in Queensland, Western Australia, South Australia, Victoria and the Northern Territory.
The Missing Persons Advocacy Network says potentially reuniting families with the remains of their loved ones and allowing them to be respectfully laid to rest will help them on their justice journey.
"We know through our work with families in situations like these that a conviction is only the first component of achieving justice," the charity said in a statement.
"The torment of ambiguous loss ... continues to plague those left behind until their missing loved one is found, regardless of their fate."
Opposition corrections spokeswoman Tara Moriarty said Labor needed to see the detail of the legislation but would support it, saying the change was long overdue.
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