Minister for Children Kelvin Davis says he is "not into separatism" and that Oranga Tamariki needs to work in partnership with Māori while the Crown still retains a role.
Davis welcomed the report by Children's Commissioner Andrew Becroft who is calling for the transfer of Māori children and babies in state care to Māori groups.
He told Morning Report he was ready to have the conversation.
"We have to be brave and admit where Oranga Tamariki have got things wrong and what needs to change. Working in partnership with Māori is what needs to happen.
"If we move to a by Māori for Māori system we have to make sure that we get it right.
"I'm not into separatism. The Crown can't absolve itself of its responsibility to make sure children grow up in safe and loving families."
He would not elaborate but said the general direction was a shift of power and resources towards Māori.
"We can move from what is a eurocentric paradigm towards a more Māori way of doing things."
Any new system had to be better than the previous one, he said.
"The first thing we have to do is make sure the mana of the child, the parents, the wider whānau, hapū and iwi are maintained; that we work with manaakitanga, whānaunatanga, atawhai to make sure that the best outcome is met but we do it in a Māori way.
"My personal belief is we need to move to a Māori way of doing things, what that looks like ultimately needs to be decided.
"There's still a role for the Crown."
Davis had been meeting with some of Oranga Tamariki's harshest critics and some Māori were "supportive" of the organisation.
"I don't think separatism has worked anywhere in the world, we have to work together in a partnership."
Davis ruled out allowing and hapū to take over all of the state's powers to care for their tamariki.
That's something the Children's Commissioner Andrew Becroft has called for, as part of his inquiry into the removal of babies by the Children's Ministry.
The report is part of a large scale investigation into Oranga Tamariki which found that Māori babies were five times more likely than non-Māori babies to be taken into state care. The urgent removal of Māori babies from their whānau has doubled since 2010.
Assistant Māori Commissioner for Children Glenis Philip-Barbara said the government must determine whether iwi and hapū could take on a transfer of power from Oranga Tamariki.
"What we're asking for is for the government to recognise mana Māori by handing over the power to define, determine and decide what 'good' looks like for tamariki Māori to Māori.
"I don't think we've had a better time in our history as a nation to realise this dream. I'm hopeful that government will step back and understand how important it is to share power as a Treaty partner."
In a statement, Oranga Tamariki chief executive Grainne Moss said any further decisions were the government's responsibility.
Giving Māori control of own tamariki a 'positive step'
The Human Rights Commission is backing calls to give Māori control over the care of tamariki Māori saying self-determination is a fundamental part of indigenous human rights.
Race Relations Commissioner Meng Foon told Morning Report there were several organisations by Māori built on a trust system like rangatahi youth courts held on marae and kohanga reo that were working well.
Tūhoe signed an agreement with Oranga Tamariki last year, and Foon said over the weekend there was a report that it had already seen a 50 percent reduction in babies being taken.
"That's a good thing. They've worked with the Crown, the government agency to actually design a process where there is going to be less harm, and it is about supplying confidence, and it is about by Māori for Māori."
He said giving over power had benefits not only for Māori families and children but for all of New Zealand.
"The buck stops with ... the government, because they have the finances they have the law and the statutes for looking after our children ... let's give it a go.
"It's not separatism. The Treaty of Waitangi explicitly says that Māori look after their own and the Crown looks after everybody else. That hasn't been afforded, all the resources are being conquered and there's no resources in Māoridom to look after their children properly.
"Devolving of resources, devolving of trust and confidence to Māori is a positive step. Devolving services and mana comes with responsibilities as well so it's a big burden not only on the Crown but also on Māoridom to actually ensure that they are too looking after their children better than the current system."