0243 GMT July 21, 2019
The decision on Tuesday came years after the First Nations and Family Caring Society, as well as the Assembly of First Nations, lodged a complaint with the Canadian Human Rights Commission against the government in 2007.
They said Ottawa was underfunding child welfare services on reserves in comparison with the support provided by provincial governments to non-native children or aboriginals living off reserves.
The tribunal said the federal government's funding model and management of its First Nations child and family services have led to “denials of services and created various adverse impacts for many First Nations children and families living on reserves.”
The decision also called on Ottawa to stop “the discriminatory practice and take measures to redress and prevent it.”
The tribunal further urged the child welfare system and its funding model to be redesigned and said experts’ aid is needed to ensure that First Nations receive culturally appropriate services.
Hearings on the case only began in 2013, with the federal government making several attempts to have it thrown out.
The development comes as the relationship between the nation's 1.4 million aboriginals and the federal government has already been plagued by many problems.
Aboriginals make up five percent of Canada’s population of more than 35 million, but they struggle with poverty and desperation as well as high rates of crime and suicide. They also have a lower life expectancy than other Canadians.
Prime Minister Justin Trudeau, who came to power in November 2015, has promised to mend relations with Canada's indigenous people.
Over 30,000 Canadian children aged 14 and under are living in foster care and about half of them are from indigenous community.
Canada has a two-tiered funding system as Ottawa funds child welfare services for aboriginal children on reserves, while individual provinces support child welfare services for non-native children and native children who do not live on reserves.