David Martin argues that a fundamental issue confronting Australian Indigenous groups and communities is how to develop the capacity to engage strategically with the general Australian society, in particular with its political and economic dimensions. 'Strategic engagement' refers to the processes through which Indigenous individuals, groups and communities interact with the formal and informal institutions of the dominant Australian society in a manner that provides them with real choices. It refers to a process, not an outcome. This capacity for strategic engagement is dependent upon many factors, but effective governance mechanisms are critical. Institutions for more effective governance must draw from Indigenous values and practices, from those of the general Australian society, and from relevant international experience. It is no longer defensible to resort to the mantra of 'cultural appropriateness', nor solely to traditions and customary practices in determining principles by which institutions should be established and operated. The challenge is to develop distinctively Indigenous institutions which facilitate effective engagement rather than limiting it. This paper suggests a set of principles for this task.