Embattled Northern Territory Labor leader Delia Lawrie has announced she is stepping down, but stops short of endorsing Michael Gunner.

On Saturday, it was revealed Ms Lawrie was being investigated by police for her conduct for her conduct during the Stella Maris inquiry.

At her office in her electorate of Karama, Ms Lawrie said she would be focusing on her upcoming legal problems.

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“I’ve made a personal decision based on what’s best for myself and for my family,” she said.

“I have had a great two-and-a-half years working as leader … but now is the time to focus on what I need to do, which is the legal challenge confronting me,” she said.

“The news that the CLP were referring the Stella Maris (inquiry) to the Director of Public Prosecution and the police makes me want to focus my mind with my legal team.

“I won’t have time to dedicate to the leadership role and so I am resigning as leader effective tomorrow.”

Ms Lawrie said she had not spoken to Michael Gunner, who announced on Wednesday he would challenge Ms Lawrie for the leadership, and would not be drawn on whether he had her support.

“I will be part of a united Labor team, that’s what I do. I love my party, I love the work I do,” she said.

“I’m a team player.”

NT Labor president Syd Stirling said the month-long leadership ballot process foreshadowed last week could now be dispensed with and Mr Gunner would be leader, bypassing the vote of the rank-and-file members.

“No need for a ballot … with the withdrawal of Delia, Michael Gunner will be accepted as leader by the administrative committee,” Mr Stirling said

Mr Stirling said party members would not feel shut out by such a process.

“I think most members would welcome we have certainty,” he said.

Mr Stirling said Ms Lawrie had made the right decision.

“I think Delia came to the realisation she had to put the party first,” he said.

Stella Maris process ‘could have been better’: Gunner

At a press conference on Sunday, Mr Gunner said he was “proud to be leading a strong Labor team”.

NT Labor politician Michael Gunner announces his candidacy. Photo: ABC

He said Ms Lawrie had “made the right decision” and thanked her for “the dignity (with which) she handled herself over the last couple of days”.

“I’m not going to ask Delia for support, I want to work with Delia, I think our whole team wants to work together to hold a bad CLP government to account,” Mr Gunner said.

“We have shown over recent weeks and this term that we can work together and we are capable of mature conversation,” he said.

Mr Gunner says he “can understand” Ms Lawrie’s motives over the Stella Maris affair.

“When it comes to knocking down buildings, heritage buildings, the CLP (Country Liberals) have form,” he said.

“I can understand the desire to protect the heritage of Stella Maris, but I think it is clear the process could have been better.

“The objective and the intention may have been in the right place, but without doubt the process could be better.”

Mr Gunner said his job was to make NT Labor a “credible alternative” and convince the public that “Territorians can trust us”.

“The number one skill you can bring to politics, to being a parliamentarian, requires listening. The first thing you do, is to listen to Territorians. It all comes from that very first conversation,” he said.

Mr Gunner would not say who he wanted as his deputy leader.

“We will decide as a Caucus meeting … at the moment [that meeting] is planned for Thursday.”

Mr Gunner said he anticipated a reshuffle of roles on the Opposition front bench.

The CLP Government holds a 14-8 seat majority in the Northern Territory.

The next Northern Territory election is set for August 27, 2016.