Northern Territory Parks and Wildlife has issued two permits to Newcastle Waters Station, owned by beef producer Consolidated Pastoral Company, to carry out the parrot culls using firearms or poison.
The permits allow the killing of 5000 corellas and 15,000 galahs.
In a joint statement on Thursday, NT environment groups said the cattle station was adjacent to Lake Woods, a wetland of national significance supporting over 100,000 waterbirds during the wet season.
"It is unclear whether the NT government considered the risks of harm to threatened species that live in this area, including greater bilbies, red goshawks, gouldian finches, and grey falcons," they said.
BirdLife Australia, BirdLife Top End, Protect Big Rivers and Environment Centre NT urged the federal government to investigate how the permits were granted and act to protect native wildlife in the NT.
Responding to questions in the NT parliament, Wildlife Minister Marie-Clare Boothby said bird numbers at Newcastle Waters, 280km north of Tennant Creek, had reached "unsustainable levels".
The increase was put down to a rise in grain production and on-site storage and cattle feeding at the station, providing food for the birds.
The Department of Parks and Wildlife granted the permits after consulting NT government wildlife scientists, Ms Boothby said.
Consolidated Pastoral Company chief executive Troy Setter said the birds were eating crops and presented biosecurity risks, citing bird flu.
An initial trial of stupefying poison was successful on 30 birds but a cull was not currently underway, he told the ABC, with the permits a "last resort" behind scaring the birds away by firing shots.
Staff were having trouble sleeping because of the "exceptionally noisy" birds.
Mitch Rose, of BirdLife Top End, said the use of poisons could jeopardise other birds that were endangered, including red goshawks that prey on the parrots.
"It's shocking that 20,000 of Australia's iconic birds are being culled," he told AAP.
The birds were problems at catte stations but culling them should be "an absolute last resort, Mr Rose said.
"It's illegal in Victoria to poison parrots like that, just because it's inhumane."
Dr Sam Phelan, founder of Protect Big Rivers, said thousands of migratory waterbirds could become collateral damage from any poison used.
"This kind of ill-considered destruction is exactly why Australia leads the world in species extinction rates.
"Multinational corporations chasing profits at the expense of entire Australian ecosystems, really has to stop," Dr Phelan said.
Environment Centre NT campaigner Allana Brown, said it was believed to be one of the largest single permits for a cull of native birds ever granted in Australia and it warranted greater scrutiny.
"The government-mandated slaughter of Australia's iconic wildlife on such a massive scale is simply blood-curdling," she said.
The permits to kill birds at Newcastle Waters expire on September 30.