Kelly was hanged at the Old Melbourne Gaol in 1880, but documents show his remains and those of 32 other executed prisoners were exhumed and reburied at Pentridge Prison in 1929.
Archaeological digs at the site of the former prison have unearthed unmarked coffins containing the remains of the executed prisoners, badly decomposed and mingled.
“We have still some testing to do, but it’s pretty clear we have found them,” said senior archaeologist Jeremy Smith.
“Identifying the remains of Ned Kelly may prove difficult, as his were not handled with a great degree of care,” he said in a statement.
“It is also possible that his skull and other body parts were stolen immediately following his 1880 execution.”
The remains will be taken to the Victorian Institute of Forensic Medicine for analysis and identification, State Planning Minister Justin Madden said.
Kelly, a bank robber who killed three policemen, evaded capture for nearly two years before he and his gang faced a final showdown with the law in Glenrowan in northern Victoria state on June 28, 1880.
Three of the four gang members were killed and Kelly, wearing armour made of ploughshares, was wounded and captured.
Born to an Irish ex-convict father, Kelly is seen by some as a kind of Robin Hood who robbed the rich because of injustices toward the poor.
The Australian government’s own cultural website describes Kelly as “one of Australia’s greatest folk heroes” and says more books and songs have been written about him and the Kelly Gang than any other Australian historical figures.