The Australian government has struck a US$14 million deal to buy the copyright to the Aboriginal flag, ending a long-running debate about its public use.

Prime Minister Scott Morrison said his government had "freed the Aboriginal flag for Australians."

The deal emerged from negotiations with Aboriginal artist Harold Thomas, who designed the flag in 1971.

Over the past 50 years, the flag has become an important symbol of protest and celebration for Australia's Aboriginal people.

But there was intense debate about public use of Thomas' design after the artist granted licenses to companies to use it on their products.

The Australian government has reached a copyright deal with the creator of the Aboriginal flag so that it can be used by all without restriction The Australian government has reached a copyright deal with the creator of the Aboriginal flag so that it can be used by all without restriction Photo: AFP / Trevor Collens

One of these companies, WAM Clothing, sent cease and desist letters to many organisations, including the Australian Football League, for using the Aboriginal flag on clothing.

"I hope that this arrangement provides comfort to all Aboriginal people and Australians to use the flag, unaltered, proudly and without restriction," Thomas said of his deal with the Australian government.

"I am grateful that my art is appreciated by so many, and that it has come to represent something so powerful to so many."

Morrison said the deal means the flag can be used on apparel, sport grounds, artworks "and in any other medium without having to ask for permission or pay a fee."

The deal will also see any the Australian government set up a scholarship in Thomas' honour worth $100,000 for Indigenous students.