Daley, Foley top NSW Labor leadership race

The new NSW Labor leader will be selected at a caucus meeting early next year with Michael Daley and Luke Foley shaping up as favourites.

Blacktown MP John Robertson quit as opposition leader on Tuesday afternoon, a day after announcing he had signed a letter for extremist gunman Man Haron Monis in 2011.

Mr Foley, the party's upper house leader, is expected to stand for the lower house seat of Auburn if successful in the January 5 leadership ballot, News Corp reports.

Deputy opposition leader Linda Burney is also expected to stand, but News Corp reports that the race will likely be between Mr Foley and Mr Daley, the member for the seat of Maroubra.

Mr Robertson's resignation comes only three months out from the March election, which Labor is widely tipped to lose.