NSW Deputy Premier John Barilaro has withdrawn his threat to lead his Nationals MPs to the crossbench, in a move that will keep the Coalition intact but may leave his leadership untenable.

After an early morning National party room meeting over Zoom, Mr Barilaro went to Premier Gladys Berejkilian's office where he said he would back down from his threat to tear apart the Coalition.

A senior Liberal source said Mr Barilaro had "100 per cent capitulated and could not even secure a date to discuss the Koala SEPP and it will come to cabinet in due course".

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