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This paper examines the impact of the Community Development Employment Projects (CDEP) scheme on the determinants of Indigenous employment in Australia. CDEP is a publicly funded employment program, mainly located in rural and remote areas of Australia, and designed to address labour market disadvantage and a lack of local employment opportunities. It provides work managed by, and on behalf of, the local community and caters for Indigenous people with poor employment prospects, especially youth, those with low skills, and people who have difficulty speaking English. Although the scheme provides a small proportion of Indigenous employment in major Australian cities it is a major source of employment in rural and remote areas. The author suggests that the dominance of the scheme in certain regions of Australia complicates the interpretation of any analysis of Indigenous employment. In order to enhance interpretation, a separate examination of the factors underlying Indigenous employment for areas where the CDEP scheme is relatively dominant is undertaken using the 1994 National Aboriginal and Torres Strait Islander Survey (NATSIS) and census data from between 1981 and 1996. The purpose is to highlight potential biases in the effects of educational attainment and other factors on the employment prospects of Indigenous and non-Indigenous populations. The overall finding is that the measured factors underlying employment prospects are reasonably stable in light of a substantial expansion of the CDEP scheme in various parts of the country. However, in areas where the scheme’s expansion is most pronounced, it has had an impact in protecting the Indigenous workforce from the collapse in the market for low-skilled jobs. The main policy implication of the findings is that Indigenous youth are encouraged to finish school rather than move straight onto the CDEP scheme where they are protected from the realities of the labour market. The importance of maintaining the correct incentive structure for youth is particularly significant for youth in other urban areas where there are more likely to be substantial employment opportunities for Indigenous people in the mainstream labour market.