Adam Marshall will abstain from voting on government bills until amendments are made to a state policy relating to koala habitat protection.
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The Nationals say they reserve the right to support bills and motions that are important to regional NSW, effectively putting the entire party on the crossbench.
Premier Gladys Berejiklian was blindsided by the loss of her coalition partner, finding out about the dramatic move when the Nationals' leader shared the explosive news at a press conference.
Late on Thursday the premier said it was not possible to be the Deputy Premier or a Minister and sit on the crossbench.
"I have just made it clear to the Deputy Premier that he and his Nationals colleagues who are members of the NSW Cabinet have until 9am (tomorrow) to indicate to me whether they wish to remain in my Cabinet or else sit on the crossbench.
"They cannot do both."
The Armidale Express has attempted to contact Mr Marshall, who is Minister for Agriculture, to ask what he planned to do in the wake of the premier's advice to ministers.
Deputy premier John Barilaro made the announcement on behalf of the NSW Nationals on Thursday morning.
Mr Barilaro said the party "needed to flex some muscle" to ensure farmers were not hindered by the State Environmental Planning Policy (SEPP) Koala Habitat Protection policy.
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They also want a thriving koala population in NSW, but say the SEPP achieves none of this.
The Nationals will introduce a bill to the Legislative Assembly to repeal the SEPP on Tuesday.
On Thursday, Mr Marshall has backed his leader.
"Nobody is arguing about the intent of these new regulations, least of all me. Everybody can agree it's important to protect koalas and our farmers already do a lot of the heavy lifting in this regard," Mr Marshall said.
"As the Member for Northern Tablelands and our State's Agriculture Minister, what I am concerned about is the many unintended consequences these regulations will have.
"The fact is, the new SEPP, in its current form, will tie our farmers up in green tape, lock up their productive land and ultimately drive many of them away from farming," he said.
Mr Barilaro denied the party was splitting from the Coalition and said the Liberals needed to "come to the table" and consider the amendments the Nationals were putting forward about the SEPP.
"This is about the rights of our farmers and our regional communities," he said.
"We will be abstaining from voting on government bills but reserve the right to vote on bills and motions that are important to regional and rural Australia.
"It's effectively putting all members on the crossbench in a roundabout way. All members are united on the cross-bench in a way of not supporting government bills. But we are not going to surrender our portfolios ... we're going to sit back and fight."
Mr Barilaro said the party was backing "sensible, scientifically-backed amendments to the SEPP that actually protect koalas and allow us to build koala habitat across the state".
Among the proposed changes are a clear definition of core koala habitat; increasing the number of core koala trees species from 10 to 39; decoupling of Private Native Forestry from the Koala SEPP; that rural regulated land and agricultural production come under the land management framework operating outside of the SEPP; and local councils be required to carry out on-ground surveys in areas of proposed core koala habitat on private land.
