SA premier Jay Weatherill made the surprise announcement to a packed news conference, saying the inquiry would look into the state's involvement in the mining, enrichment, energy, and storage phases in the nuclear fuel life cycle.
"South Australians should be given the opportunity to explore the practical, financial and ethical issues raised by a deeper involvement in the nuclear industries," he said.
"We need a clearer understanding about the nature of energy demands around the world and indeed in this country."
Weatherill said SA had one the world's largest uranium deposits and had been involved in a limited capacity in uranium production since the 1980s.
"It is now the time to engage in a mature and robust conversation about SA's future role in the nuclear industry," he said.
"The truth is we are already in the nuclear fuel cycle. I mean we are selling uranium to the world. The question is whether we should deepen our involvement for our benefit and we need to understand what those benefits look like.
"Let's perhaps look at what the opportunities are and let's understand the risks so we can make a considered judgment."
Weatherill said consultation would commence later on in the week on the terms of reference.
General response
Environmental lobby groups moved in fast to condemn the government's decision, with the Australian Youth Climate Coalition saying Labor's focus should be on renewable energy rather than nuclear.
Minerals Council of Australia (MCA) backed the government's move, calling it a "bold" announcement.
MCA Executive Director Dan Zavattiero said nuclear power played a "critical role" in the sustainable production of world's electricity.
"This is clear in forecasts by the International Energy Agency and in repeated calls by the IPCC for the world to triple or quadruple all low emissions energy sources including nuclear power," he said.
"Australia's uranium industry is well established, highly regulated and second only to black coal in terms of Australia's primary energy production.
"It operates safely and responsibly and forms an outstanding basis on which to explore further potential in the nuclear fuel cycle."
Zavattiero said the MCA looked forward to contributing more to the conversation.
