Ms Ley said the government is sympathetic to the suffering of those with debilitating illnesses.
The absence of a mechanism for safe, legal and sustainable supply means patients and researchers have turned to overseas supplies of medical cannabis.
"Allowing the cultivation of legal medicinal cannabis crops in Australia under strict controls strikes the right balance between patient access, community protection and our international obligations," Ms Ley said in a statement.
Provision of legal cannabis to treat medical conditions appears to have broad community support.
A Greens bill now before the parliament has attracted support from across the political spectrum.
Ms Ley said the government will consult the Greens, Labor and cross-bench MPs as well as states and territories on the draft amendments. A final version will go before the parliament by the end of the year.
The government envisages that medical cannabis will only be available to patients through a doctor's prescription or a medical trial.
This does not mean legal recreational use of cannabis is any closer.
"At the end of the day, cannabis is classified as an illegal drug in Australia for recreational use and we have no plans to change that," Ms Ley said.
Meanwhile, Labor says it will work with states and territories on national medicinal cannabis laws if it wins government.
Party leader Bill Shorten said people who are terminally ill or have other medical conditions will have access to medicinal cannabis under the policy unveiled on Friday.
He said a Labor government will work with states and territories to reform criminal laws so eligible people are exempt from prosecution for possession and use.
The plan calls for the Commonwealth to become the national regulator of medicinal cannabis and for the government to establish rules for licensing one or more producers.
- AAP
