Ned Kelly, the famous outlaw hanged in 1880 for leading a gang of bank robbers in Victoria and killing three police officers, could very well rest in peace now 133 years after his death after a new exhumation licence was signed by the Victorian government on Thursday that effectively allows the return of the remains of the notorious bushranger to his family and descendants.

Kelly's descendants welcomed the good news, but the joy was abrupt as there remained one missing link - his skull remains nowhere to be found after it was stolen in 1978 from an Old Melbourne Gaol display case.

"Both the Kelly and King families are glad to have matters resolved and to be granted the variation to the Exhumation Licence to have Ned's final wish granted," said Ellen Hollow, great grand-daughter of Ned Kelly's sister Kate Kelly.

The family pleaded that his skull be also returned to them.

"The Kelly family will now make arrangements for Ned's final burial. We also appeal to the person who has the skull in their possession to return it to the Victorian Institute of Forensic Medicine, so that when the time comes for Ned to be laid to rest his remains can be complete," Ms Hollow added.

After his execution, the whereabouts of Kelly's corpse remained unknown for decades. The blackhole turned bright last year when a group of forensic scientists properly identified his skeleton, along with two dozen other skeletons, after it was found in a mass grave on the site of a now-closed prison.

The Victorian government issued the license to the developer of the Pentridge Prison site in Melbourne to refrain it from using the bushranger's remains for a museum or memorial.

Kelly's descendants wanted the remains returned to them so they could give Kelly a proper burial, at a time and place of their choosing.

The famous Australian outlaw will most likely be buried in a small cemetery south of Glenrowan, about 230 kilometres northeast of Melbourne, where his mother and several siblings have been laid to rest in unmarked graves, according to the AAP.

The family has requested that their privacy be honored in this undertaking.

"This is no different to any family burial. We'd like to be able to do it our way and in a private way. That's just our preference," Anthony Griffiths, great-grandson of Ned Kelly's younger sister Grace, told ABC Melbourne.

"We would certainly hope that people would respect that it's not just about the myth. This is actually about the remains of a person. Wherever they're laid to rest, they are literally the grave of a person."

"The family is absolutely opposed to them being used as some sort of tourist attraction. That's just obscene."

Kelly's interesting life had led to the filming and showing of two movies, one in 1970, starred by Mick Jagger, and in 2003, with the late Heath Ledger in the title role.