NSW will divest itself of Russian assets in its investment funds, to protest against President Vladimir Putin's invasion of Ukraine.
At least $75 million worth of Russian assets acquired by the NSW Generations Fund will be sold.
"Putin's illegal invasion has put at risk global security and he is personally responsible for the consequences of this war," Treasurer Matt Kean said on Monday.
"My thoughts are with both the brave people of Ukraine and the Russian people protesting against Vladimir Putin notwithstanding the risk of arrest.
"It is important at this time for liberal democracies to stand with Ukraine and stand up for our values.
NSW opposition treasury spokesman Daniel Mookhey welcomed the decision.
"Vladimir Putin's debt should never have been in NSW's investment portfolio. Especially since he was using that money to build the army that is currently marching into Ukraine," Mr Mookhey said.
The move comes after the federal government said it would impose financial sanctions on eight Russian oligarchs and the government is also considering other measures that could be implemented globally.
Federal Treasurer Josh Frydenberg believes Russia could be kicked out of international forums like the G20.
Mr Kean told a budget estimates hearing on Monday there was a broader review being conducted on the state's investments but Russian investments were now "a unique situation".
"We wanted to move on that in step with the rest of the world," Mr Kean said.
He has concerns "about where we're investing NSW taxpayer money".
"I don't think it should be going towards tyrannical regimes, dictatorships, organisations that don't share our liberal ideals - liberal values - and that's what this review will look at," Mr Kean said.
