Community Legal Centres Australia released its latest snapshot of operations, A Sector in Crisis, on Monday, estimating more than 350,000 people across the country had been turned away in the past financial year.
Community Legal Centres Australia chair Gerard Brody said legal centres have been saying they are at breaking point for some time.
"People are missing out on the help they need to prevent problems getting worse and to make it through crisis," he said.
"Local legal services are being forced to limit programs, cut off waiting lists and some are struggling just to keep their doors open under the current funding arrangements.
"When communities lose their local legal services, it hurts everyone living and working in that community."
At a launch of the report at parliament house in Canberra, Pilbara Community Legal Service chief executive Joanna Collins gave an example of how the centre helps community members.
Ms Collins described the case of Mary, a pregnant Aboriginal mother in her early 20s who was represented by the office following an extreme domestic violence incident.
Ms Collins said the holistic approach offered by the legal service meant Mary was able to receive legal assistance to get a Violence Restraining Order, and get help with child protection, housing, and birthing support.
Ms Collins said because of inadequate funding, many in the community go without the help they need.
"Community legal centres need proper resourcing so that we can keep providing free legal and social services to people experiencing disadvantage, and this must be a government priority," she said.
"Mary is one example of the transformative impact community legal services have in their local communities."
Attorney-General Mark Dreyfus acknowledged staff at community legal centres were operating in tough conditions.
He promised to release a review of the national legal assistance partnership - which includes funding arrangements for community legal centres - by Dr Warren Mundy "relatively soon".
"I'm very hopeful it will be a good foundation for some real reform in the sector," he said.
For Victorian Aboriginal Legal Service chief executive Nerita Waight funding reform can't come soon enough.
"A lack of resourcing means we can't be embedded in communities as much as we would want with providing full services in civil, family and child protection and criminal law," she told AAP.
"It also means that we're going through periods of having to withdraw services."
A Sector in Crisis draws on data from a national survey of 117 community legal centres from all states and territories, and consultations with more than 130 community legal workers and case studies.
The report calls on the federal government to provide an urgent funding injection and long-term security in the May budget.
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