Announcing her bid for the Labor leadership in her inner Sydney Strathfield electorate, Ms McKay styled herself as someone with "country values" who could broaden Labor's base across the state.

"I despair that in rural areas across NSW there is a view that if you are unhappy with the National Party, you still can't vote for the Labor Party," Ms McKay said.

"I say to rural NSW, if a country kid from Gloucester can stand for the leadership of the Labor Party, then you can vote Labor."

Ms McKay grew up in Gloucester on the Mid North Coast of NSW, but left when she was 18 and settled in Newcastle.

She was the member for Newcastle between 2007-2011, and held several ministerial roles during the last Labor government, including as the minister for tourism and minister for the Hunter.

After a hiatus, she returned to politics as the Member for Strathfield in 2015, and has served in shadow cabinet since then.

Ms McKay's nomination sets up a two-horse race for the leadership, after Kogarah MP Chris Minns announced his bid on Thursday.

The successful candidate will be chosen through a month-long ballot process, with the parliamentary caucus and rank-and-file members each having a 50 per cent say.

In a bid to demonstrate her support in the local branches, Ms McKay assembled dozens of grassroots members, many decked out in her red state election campaign t-shirts, to serve as the backdrop as she announced her nomination in Homebush West.

"I've always stood up for what is right," Ms McKay said. "I can also unite our caucus. We have to have a stable and united team if we are to win the election in 2023."

Ms McKay did not go into detail about her key policies, and said she would consult branch members about "their vision" for their communities.

"I want the party members to tell me what they want to do with the environment and renewable energy, and what they expect us to do around climate change," she said.

"I want to know what their vision is for education and hospitals. We have to put people first."

However, she listed education as her "key" priority, and was critical of the party's focus on the issue through the prism of infrastructure at the March election.

"We failed to put meat around our argument on schools and hospitals," Ms McKay said.

"We spoke about demountables, we spoke about air conditioning, we spoke about schools maintenance. We need to do better than that."

Both Ms McKay and Mr Minns are from the party's Right, and will spend the next month canvassing support from colleagues, branch members, and unions.

While some Left wing unions have made clear their disdain for Mr Minns, they have stopped short of endorsing Ms McKay.

Other unions, including the Right wing Electrical Trade Unions, Health Services Union, and Transport Workers Union, were struggling to find consensus support for either candidate.