The seizure of 235kg of the alcohol substitute was made on Tuesday at Galiwinku on Elcho Island, 550km northeast of Darwin, following reports kava was being distributed in the area.
More than $15,400 in cash was also seized and two men, aged 28 and 35, were arrested following a police search of a property.
The pair have been charged with possessing and supplying a commercial amount of kava and were remanded in custody after appearing at Darwin Local Court on Thursday.
Under the Northern Territory's Kava Management Act, the maximum penalty for supplying a commercial quantity of kava is up to eight years in prison.
Kava, an extract from the root of a pepper plant found on Pacific Islands, was introduced to Aboriginal and Torres Strait Islander communities in northern Australia in the early 1980s as a substitute for alcohol.
It has traditionally been cultivated by Pacific Islanders for use as a social and ceremonial drink, either ground or chewed up and mixed with water or coconut milk.
The effects of kava include muscle relaxation, sleepiness and feelings of wellbeing.
The Department of Health's Office of Drug Control says on its website that incoming passengers can bring up to 4kg of kava powder into most of Australia for personal use, but this is not allowed in the NT.
The latest kava seizure was not the largest in the territory but was significant for mitigating impacts within the community, NT Police said in a statement on Friday.
The illegal distribution of regulated substances harmed the health of community members and exploited them financially, a spokesperson said.
"The NT Police Force remains committed to disrupting the supply of kava and holding offenders accountable."
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