The Andrews government last week began moving children in youth custody at Parkville to the prison, following riots that caused about $2 million in damage.

It is understood that in the wake of the change of heart on the detention of Indigenous youths, lawyers are already planning a fresh legal challenge to the legality of detaining any children in adult prisons.

If that succeeds, the government's short-term policy of sending juvenile detainees to Barwon, the high-security adult prison near Geelong, would be in tatters.

Aboriginal children, represented by their litigation guardian Sister Marie Brigid Arthur and the Victorian Aboriginal Legal Services (VALS), had prepared to mount a Supreme Court action challenging the legality of detaining children in Barwon prison on Wednesday.

VALS said that the children were being kept on lock down for more than 20 hours a day, which the Department of Health and Human Services has said was not part of their "standard management".

Fairfax Media understands that a number of Aboriginal children who had been transferred to Barwon prison were taken to youth detention centres at Malmsbury and Parkville on Sunday, in exchange for the case being halted and a promise that no Aboriginal children would be taken to adult prison in future.

Richard Attiwill, QC, for the secretary of the Department of Health and Human Services, made that promise to the Supreme Court on her behalf on Tuesday.

"I undertake on behalf of the [secretary] that she will not authorise or cause the removal of any Aboriginal child to any youth justice or remand centre established at Barwon prison [or] any youth justice or remand centre ... that is part of or annexed to an adult justice facility."

Associate Justice Mary-Jane Ierodiaconou accepted the promise and made it a court order.

Since the riots, Premier Daniel Andrews has tried to talk tough on youth offenders, saying he made "no apology" for sending inmates to adult prison, because the community had had enough of their behaviour.

But on Tuesday afternoon, Mr Andrews' office declined to comment on the undertaking in court, referring the media to his minister's comments.

Shadow Minister for Children Georgie Crozier said the decision showed that "once again youth offenders are calling the shots and Daniel Andrews caves in".

Mr Attiwill told the Supreme Court that the government would continue to abide by the undertaking regarding Indigenous children until May 27, 2018, unless there was a further court order, or the secretary of the Department of Health and Human Services received advice from the Aboriginal Children's Commissioner Andrew Jackomos that taking them to an adult prison would be in the best interests of the child.

The secretary would only seek such advice in "exceptional circumstances", and would provide written information to the commissioner justifying any proposed transfer, he said.

A spokesman for Mr Jackomos said that he had previously written to the Minister for Children and Families, Jenny Mikakos, about his concerns regarding the detention of children at Barwon and was awaiting her reply.

He declined to comment on Tuesday's settlement, saying he needed time to consult with stakeholders and understand how future requests from the secretary would work under the court promise.

Ms Mikakos maintained in a statement that the transfers were legal and in line with the Charter of Human Rights and Responsibilities.

"The settlement made does not preclude Aboriginal young people being transferred to the Grevillea Unit at Barwon prison," she said.

The government last week declared the secure unit a youth justice facility.

VALS chief executive officer Wayne Muir disagreed with the minister, saying: "There's a whole range of checks and balances [they have promised to undergo] before they can get to that point and on that basis we believe that won't be occurring."

The Human Rights Law Centre, which co-ordinated the legal challenge due to begin in the Supreme Court on Wednesday, estimates that more than 20 Aboriginal and non-Aboriginal children had been transferred in the past week, with daily transfers continuing, and 15 non-Indigenous youths at Barwon Prison as of Tuesday.

The centre's director of legal advocacy, Ruth Barson, said the centre "would be doing everything we can" to get children released from Barwon.

She said the government had "essentially admitted" that locking up children was unlawful, by agreeing to release Aboriginal children on the eve of the Supreme Court challenge.

"Protecting one group of children while continuing to mistreat another group of children is completely unacceptable," Ms Barson said.

Ms Barson said the government had made "an extraordinary offer" to protect Aboriginal young people as part of its settlement with VALS.

"The greater injustice remains which is that, as we speak, children are still locked up in Barwon prison."

She called on the government to transfer non-Indigenous children out of Barwon, but said in the mean time lawyers would "certainly be exploring all of our options" to hasten their removal.

"[Premier] Daniel Andrews could decide to protect the rights of all children, rather than just the handful who we act for," she said.

"It shouldn't be up to lawyers to litigate for the rights of all children in Victoria."

Brian Walters, QC, acting for the children, told the court that the agreement to settle was ultimately about the best interests of his clients.

The case, he said, would have been complex if it had gone ahead, and would likely have involved arguments about public interest immunity and privilege over a number of documents.

The agreement reached instead provided "certainty and protections that could be obtained by the proceedings".

Fairfax Media has been told that the minister has also agreed to arrange free legal help for the children from the Victorian Aboriginal Legal Services as part of the settlement.

Mr Muir said outside court the settlement was bittersweet. "It's critical that we've protected the rights of our children."

"Putting kids in an adult jail is dangerous.

"But to our non-Indigenous brothers and sisters, sons and daughters, who the government is leaving to rot in the state's worst adult prison, we stand by you."

With Richard Willingham