The AFL says it will consider pulling the annual Melbourne Demons match from Alice Springs, unless the town council reverses its decision to bar community football from Traeger Park.

It is the latest escalation in an increasingly bitter dispute between the Alice Springs Town Council and AFLNT, after the council withdrew support for the upcoming Central Australian community football competition amid concerns about crime rates and social issues in the town.

In an email to the council, seen by the ABC, the league said it would "review the viability" of holding the Round 16 match between Melbourne Demons and GWS Giants in Alice Springs in June.

The AFL and AFLNT have been approached for comment.

Alice Springs Mayor Matt Paterson told the ABC the council won't be "held hostage to the AFL and their bullying attitude".

"The AFL game is a deal between the Northern Territory government and the AFL – it's got nothing to do with the Alice Springs Town Council," he said.

"If the AFL wants to hold us hostage, then that's on them, but I'm not going to be bullied into changing my decision."

Cr Paterson said decisions about football in Alice Springs should not be made by people who have not visited the region in recent times.

"This is a decision that's been derived out of Darwin and Melbourne," he said.

"This is a kick in the guts to the Alice Springs community – that an organisation feels like they can bully us."

He also reiterated calls for AFLNT to increase its investment in remote communities to improve the state of sporting fields and related infrastructure.

The council has argued the competition attracts hundreds of remote visitors each week, leading to an increase in crime and social issues in the embattled town.

The town-based football competitions have not been impacted by the decision.

On Thursday evening AFLNT said the competition would go ahead with some games played on the council-owned Traeger Park, as permitted under its licence agreement.

Central Australia's remote football competition has been dealt a major blow after the Alice Springs council withdrew its support for this season amid concerns about crime rates and social issues in the town. 

But the council countered the following day, issuing a statement that reiterated its position – that no community football would be played at Traeger Park in 2023.

The statement said AFLNT had breached the licence agreement, which pertains to the use of the park and runs through to 2025.

Cr Paterson said the breach referred to the need to provide the council with 30 days' notice of the competition fixture before the first round, which AFLNT failed to do.

AFLNT Head Sam Gibson previously told the ABC he did not intend to engage with the council by "waving a legal agreement around".

However, a statement on Thursday said following an emergency summit, AFLNT had drawn up the 2023 community competition fixture, which outlined "alternative approaches" and includes some games staged in remote communities.

It said the licence agreement with the council gave AFLNT "priority access" to Traeger Park for football.

"Administrative requirements outlined in the agreement have been substantively met, as such [community football] games have been fixtured at Traeger Park," the statement read.

"It remains AFLNT's position that we intend to work with all key stakeholders to progress both the [community] competition as well as football more broadly across the region for the betterment of the community."