Aim Associations between sleep duration and obesity and between obesity and chronic illness are established. Current rates of obesity for all Australian people are rising. Recent reports indicate that high body mass index (BMI) is a leading contributor to overall burden of disease for Indigenous Australians. Understanding the factors that contribute to higher rates of obesity in Indigenous people is critical to developing effective interventions for reducing morbidity and premature mortality in this population. To explore the effect of sleep duration on the relationship between Indigenous status and BMI in Australian children. Methods 716 non‐Indigenous and 186 Indigenous children aged 5–12 years in the Australian Health Survey 2011–2013. Primary carers were interviewed regarding children's sleep times; BMI was derived from measurement. Results Analysis of covariance revealed that regardless of a number of demographic and socio‐economic status markers, sleep duration and Indigenous status were independent predictors of BMI. However when both predictors were considered together, only sleep duration remained predictive of BMI. Conclusions Sleep duration plays an important mediating role in the relationship between Indigenous status and BMI in this Australian sample. Modification of sleep duration for Indigenous children may lead to longer‐term positive health outcomes.