The Bondi terror attack which killed 16 people is as an "act of pure evil", Anthony Albanese says, while others are urging the prime minister to take action.
Hundreds of people had gathered at Bondi Beach in Sydney for an event to celebrate the first day of Hanukkah, when gunmen opened fire, with at least 42 others injured.
Authorities say the incident was a deliberate attack on the Jewish community.
The prime minister said the day "should be a joyous celebration and the Jewish community are hurting today" and that Australians stand with them.
"What we saw yesterday was an act of pure evil, an act of anti-Semitism, an act of terrorism on our shores in an iconic Australian location," Mr Albanese told reporters on Monday.
Mr Albanese did not directly respond to criticisms from Israeli Prime Minister Benjamin Netanyahu who accused the government of "doing nothing to stop the spread of anti-Semitism in Australia".
"About four months ago I sent Prime Minister Albanese of Australia a letter in which I gave him warning that the Australian Government's policy was promoting and encouraging anti-Semitism," Mr Netanyahu said.
Chair of the Anti-Defamation Commission Dvir Abramovich said what happened at Bondi was a deadly terrorist massacre.
"A Hanukkah celebration was turned into a killing field. This is not just a crime scene. It is a national trauma," he said in a statement on Sunday.
"Families and children who came to light candles were met with murder.
"Jews were hunted and killed because they were Jewish, in public, in Australia, in full view of a society that had been warned."
In August Mr Albanese recognised a Palestinian state at September's UN General Assembly, following similar announcements by France, Britain and Canada.
The prime minister said today was a moment for national unity and vowed to stamp out anti-Semitism.
Former Liberal treasurer Josh Frydenberg said the terror attack is a tragedy of unimaginable proportions and criticised the prime minister's "hollow words".
"The massacre we have seen at one of our nation's most iconic landmarks is the culmination of an unprecedented failure of leadership to heed the warning signs that were so obvious to every Australian who opened their eyes," he said in a statement.
"The last two years has been a tsunami of hate that has left the local Jewish community feeling abandoned and alone."
Foreign Minister Penny Wong spoke to her Israeli counterpart Gideon Sa'ar, who told her of Israel's "pain and sorrow over the deadly anti-Semitic terrorist attack".
Sa'ar called for a "real change in the public atmosphere" towards the Jewish community in Australia and urged Ms Wong to take strong action, according to a statement from the Israeli Foreign Affairs Ministry.
Liberal MP Julian Leeser said the Jewish community "known for its courage and stoicism" has been left shaken.
"We must come together, check in on one another, support our Jewish friends and to offer comfort where it is needed," he said in a statement.
