NSW Deputy Premier John Barilaro is on the verge of announcing a switch to federal politics, in an audacious bid that would diminish Labor's parliamentary numbers and put Nationals leader Michael McCormack on notice.

Mr Barilaro, the NSW Nationals leader, has confirmed to the ABC he is seriously considering contesting the seat of Eden-Monaro, which is currently held by Labor's Mike Kelly.

Dr Kelly, a former military lawyer who served in Iraq and other foreign deployments, is expected to resign this week due to serious health problems.

His retirement would trigger a by-election in the marginal seat, which the ALP won at last year's election by just 1,685 votes.

"My wife and family have already sacrificed a lot for my political career and I'd already said that I would not be standing in the 2023 state election, so I need the weekend to think about it."

Mr Barilaro said no "deal" had been done between the Nationals and the Liberals on Eden-Monaro but confirmed that the neighbouring federal seat of Gilmore was among the parties' discussions.

He said he and fellow NSW frontbencher Andrew Constance had both discussed tilts at federal politics over the years.

Mr Constance, who has announced his intention to quit state politics, has been touted as a potential Liberal candidate for the seat.

"Andrew and I are friends and we have talked in the past about opportunities in Eden-Monaro and Gilmore, but Andrew and I will not be in any contest with each other," Mr Barilaro said.

This raises the prospect of Mr Constance not contesting Liberal preselection for Eden-Monaro if Mr Barilaro enters the contest.

Prime Minister Scott Morrison has made it clear he wants the Liberals to contest Eden-Monaro, should there be a by-election, but it is understood Mr Barilaro does not think a three-way contest is wise.

The ABC understands Mr Morrison has discussed the Eden-Monaro by-election with Mr McCormack this week, and the NSW Liberals will discuss it at a state executive meeting on Friday.

Barilaro tilt 'pretty much a given': Joyce

Very few inside Labor believe they can hang onto the marginal electorate if Dr Kelly departs, and are expecting the party will become the first in 100 years to lose a seat to a government outside a general election.

It is understood Mr McCormack spoke to Mr Barilaro about his possible candidacy on Tuesday night — but only after first sounding out the intentions of Sophie Wade, who ran for the junior coalition partner in the 2019 federal election, but only secured 7 per cent of the primary vote.

Former Nationals leader Barnaby Joyce, who sought unsuccessfully to challenge Mr McCormack for the party's job in February, said he believed Mr Barilaro was a strong candidate for Eden-Monaro.

"I think he is definitely the favoured candidate but he's not going to be the only horse in the field."

Mr Joyce, who resigned as Nationals leader and deputy prime minister two years earlier following revelations of an affair with a former staffer, said Mr Barilaro was well placed to enter Federal Parliament.

"John, as a local and as a high-profile politician … it puts him in a good position but he'll be up against a very strong liberal candidate no doubt as well, and a strong Labor candidate no doubt as well," Mr Joyce said.

Some believe Mr Barilaro will quickly set his sights on the Nationals leadership, should he enter federal politics.

"I've also shown a strong interest in national issues — water, the Murray-Darling Basin, drought support, bushfire support and nuclear.

"If I chose to go federal, it would be because of national — and international — interests I have."

Mr Barilaro is not unfamiliar with federal stoushes — in December 2017, he urged then-prime minister Malcolm Turnbull to quit politics, saying he would have an impact on the NSW election.

"My view is Turnbull should give Australians a Christmas gift and go before Christmas," he told 2GB at the time.