NSW Opposition Leader Luke Foley is set to be preselected as the new Labor candidate for Auburn after sitting MP Barbara Perry announced she would not recontest the seat.

At a news conference outside Auburn Hospital on Wednesday morning, Ms Perry delivered a strong endorsement of Mr Foley to become the next local MP should he be elected on March 28.

A gracious Ms Perry said she had "long hoped" Mr Foley would be her successor, although it had occurred earlier than she had planned.

Mr Foley is in the upper house but as newly elected opposition leader wants to move to the Legislative Assembly by winning the seat of Auburn at the March 28 state election.

"[Luke] is man of deep intellect, clear vision and a very strong sense of social justice," Ms Perry said.

Ms Perry said that, with Mr Foley, the Auburn community had the chance to put a future premier of NSW into the parliament.

Mr Foley, who is highly unlikely to be opposed at the January 17 preselection, heaped praise on Ms Perry's time as Auburn MP, highlighting how she "turned around" the health department's plans to close Auburn hospital when she entered parliament in 2001.

"Barbara not only turned around that decision - because it didn't close - but she had it rebuilt," he said.

Mr Foley said he had "huge shoes to fill" in Auburn, which he noted was held by former NSW Premier Jack Lang.

He said to be the Labor candidate would be "a magnificent honour".

Labor holds the seat of Auburn by 7.2 per cent, making it likely Mr Foley, once preselected, will be elected in March.

The process of getting Mr Foley to this stage has not been without drama.

Ms Perry and another former candidate, local councillor Hicham Zraika, have been locked in battle for preselection in the seat since late last year.

Ms Perry has accused Cr Zraika of branch stacking – which he denies – and has taken her claims to Labor's internal tribunals seeking his suspension or expulsion from Labor.

But shortly after Mr Foley was elected unopposed as leader at a caucus meeting on Monday, the ALP national executive cancelled the Auburn preselection and called a fresh contest for January 17.

Cr Zraika announced on Tuesday he would not run against Mr Foley and is now being considered for a safe spot on the ALP upper house ticket.

Asked if he supported bringing Cr Zraika into parliament, Mr Foley said he had no comment as it was "a hypothetical".

Ms Perry had initially said she would consider running against Mr Foley in the new preselection but denied being pressured into not doing so.

"I'm doing this willingly, its my own choice," she said.