A Piece of Red Cloth, a novel based on the oral history of Yolŋu people from north-east Arnhem Land, has won the best fiction prize at this year's Prime Minister's Literary Awards.

Co-authors Djawundil Maymuru, Merrikiyawuy Ganambarr-Stubbs, Djawa Burarrwanga and Leonie Norrington and won the $80,000 fiction prize for the work, which tells the story of a grandmother's quest to protect her granddaughter from Macassan trepang fishermen during the 1600s.

The Prime Minister's Literary Awards judges described the novel as a "landmark achievement in fiction" and it "an urgent example of intercultural work, setting a high benchmark for collaboration between Aboriginal and non-Aboriginal writers".

"It is a profound work of remembrance and re-imagination, fusing oral history, novelistic technique and deep cultural knowledge," the judges said.

Ms Ganambarr-Stubbs previously told Radio National A Piece of Red Cloth explores cultural traditions that are still apparent in modern communities while re-telling the story of how Yolŋu people had been trading with countries overseas for centuries.

"All I can is that we still live like this, like what's happening in the book today," she told the program in 2025.

"Even if we are modern people, we still go out bush, we till dig for that yams, for those roots get it up oysters, still live it, still eat it."

Dr Norrington told the ABC winning the award was a "recognition of history" and hoped her book could be a driving force for action.

"Our history has been read by the Prime Minister of Australia and now things can change."

Another Northern Territory work, Kate Wild's The Red House, about the fatal shooting of Kumanjayi Walker in Yuendumu and the murder trial of police officer Zachary Rolfe, received the non-fiction Award.

In May, A Piece Of Red Cloth received the Australian Book Industry Awards prize for Social Impact Book of The Year.