Aborigines are the most disadvantaged Australians, with indigenous children twice as likely to die before their fifth birthday as other children and Aboriginal men estimated to die 11.5 years earlier than other males.
Delivering her annual report on the nation's indigenous people, Gillard said bridging the gap on the overall life expectancy was a 25-year project and "while the challenge is very large... some progress is being made."
"The target of halving the infant mortality rates for indigenous children under five by 2018 is on track," the prime minister said.
The Closing the Gap report presented on Wednesday said the gulf in mortality rates has been narrowing and under-five mortality rates were declining for indigenous children due to improvements in antenatal care, sanitation and public health conditions.
But it also noted that child mortality rates were volatile due to small numbers. Just nine fewer deaths in the target year of 2018 are needed to meet the government goal.
The report said the biggest gap in mortality rates was not for children but for adults under 55, with indigenous Australians aged 35-44 more than four times more likely to die than non-indigenous Australians.
Circulatory conditions, cancer and injury -- including suicide and traffic accidents -- were the leading causes of death among indigenous people between 2005 and 2009.
While many Aborigines live in urban areas, large numbers also live in remote, outback regions where access to health and other services are lacking and alcohol abuse rife.
Gillard said in three key states and territories -- Western Australia, South Australia and the Northern Territory -- the indigenous mortality rate had declined by 36 percent from 1991 to 2010.
"Four years into a 25-year project, this much is true: health outcomes, employment outcomes, education outcomes are improving, they need to keep improving and to improve more quickly," Gillard told parliament.
The prime minister said decades of under-investment in services and infrastructure in areas with high Aboriginal populations were "unquestionably a major cause of disadvantage, especially for the very young."
As she called for greater unity between Aboriginal Australians, who make up about 2.0 percent of the population, and the rest of the country, Gillard backed a proposal to recognise indigenous peoples in the constitution.
Describing it as "perhaps the ultimate manifestation of respect", Gillard said it would build on the apology given to indigenous people for past wrongs four years ago.