Australia will send 600 military personnel to the Middle East as part of international efforts to wipe out Islamic State extremists.
Prime Minister Tony Abbott said Australia had received a specific request from the United States government to contribute forces to possible military action in Iraq.
He said the government had decided to prepare and to deploy to the United Arab Emirates a military force.
AAP reports that Australia's contribution would include up to eight Super Hornet aircraft, an early warning and control aircraft, aerial refuelling aircraft and a contingent of Special Forces troops.
A contingent of Special Forces will be sent to potentially act as military advisers to Iraqi and other security forces.
Four hundred air personnel and about 200 military personnel will be involved in the deployment.
Mr Abbott said the deployment did not mean Australia was at war and emphasised that Australia was part of an international coalition.
"There are obviously further decisions to be taken before Australian forces will be committed to combat operations in Iraq," he said.
"Nevertheless Australia is prepared to engage in international operations to disrupt and degrade ISIL because of the threat that this murderous death cult poses not just to the people of Iraq, not just to the people of the Middle East, but to the whole world including to Australia."
Mr Abbott warned Australia's involvement could last many months, rather than weeks.
He said he was not aware of any Australians being held hostage by IS terrorists.
There are at least 60 Australians fighting with IS and a further 100 supporting extremist groups.
The prime minister rejected suggestions Australia's growing involvement in Iraq would make it a target.
"These terrorists and would-be terrorists are not targeting us for what we have done, or for what we might do, they are targeting us for who we are, they are targeting us for our freedom, our tolerance, for our compassion, for our decency," Mr Abbott said.