The original ban was prompted by revelations of widespread animal cruelty and live baiting in the greyhound industry.

Mr Baird has argued for months that closing the industry is "the right thing to do", but decided this week to give the NSW greyhound industry "one final chance".

Mr Baird said the NSW greyhound industry will now have to follow "the strictest regulations that exist anywhere in the country".

Former Labor Premier Morris Iemma will chair a Greyhound Industry Reform Panel to advise the government on the shape of a new regime.

Mr Baird said he knew a lot of people would be disappointed by the back-down and said he and the government had “got it wrong”.

Deputy Prime Minister Barnaby Joyce said he welcomed the policy reversal. 

“The NSW Government's adoption of an industry model is welcome,” he said.