Background: The estimated life expectancy at birth for Indigenous Australians is 10-11 years less than the general Australian population. The mean family income for Indigenous people is also significantly lower than for non-Indigenous people. In this paper we examine poverty or socioeconomic disadvantage as an explanation for the Indigenous health gap in hospital morbidity in Australia. Methods. We utilised a cross-sectional and ecological design using the Northern Territory public hospitalisation data from 1 July 2004 to 30 June 2008 and socio-economic indexes for areas (SEIFA) from the 2006 census. Multilevel logistic regression models were used to estimate odds ratios and confidence intervals. Both total and potentially avoidable hospitalisations were investigated. Results: This study indicated that lifting SEIFA scores for family income and education/occupation by two quintile categories for low socio-economic Indigenous groups was sufficient to overcome the excess hospital utilisation among the Indigenous population compared with the non-Indigenous population. The results support a reframing of the Indigenous health gap as being a consequence of poverty and not simplistically of ethnicity. Conclusions: Socio-economic disadvantage is a likely explanation for a substantial proportion of the hospital morbidity gap between Indigenous and non-Indigenous populations. Efforts to improve Indigenous health outcomes should recognise poverty as an underlying determinant of the health gap.