Australia and Indonesia will sign a defence treaty that commits the two nations to regularly consult on security matters.
Prime Minister Anthony Albanese and Indonesian President Prabowo Subianto announced the agreement on Wednesday.
The deal is a "major extension" of the strong relationship between the two nations, Mr Albanese said, while at the Royal Australian Navy Base at Garden Island in Sydney.
"This is a watershed moment in the Australia-Indonesia relationship," he said.
Under the pledge, the two countries will consult at a leader and ministerial level on a regular basis, and if either country's security is threatened, consider what measures may be taken individually or jointly to deal with threats.
The prime minister said the treaty builds on the 2006 Lombok Treaty and a defence cooperation Agreement signed last year.
Mr Prabowo echoed the sentiment that the agreement enhances the nations' strong relationship.
"Good neighbours will help each other in times of difficulties and in the Indonesian culture we have a saying: when we face an emergency, it is our neighbour that will help us," he said.
The treaty will be formally signed when Mr Albanese travels to Indonesia in January.
After arriving in Sydney on Tuesday night, Mr Prabowo was welcomed at Kirribilli House for bilateral talks.
While the short trip will be the first time the Indonesian leader has come to Australia since being sworn in, Mr Prabowo previously visited Canberra in August 2024 as defence minister and president-elect.
He has served as Indonesia's president since October 2024.
Mr Prabowo travelled the short distance to Admiralty House where he received a ceremonial welcome and met with Governor-General Sam Mostyn for a state lunch.
Mr Albanese visited Jakarta for talks with Mr Prabowo in May, the first formal one-on-one meeting with a world leader after his election victory.
But ahead of the visit, human rights organisations urged that issues in Indonesia be raised with the leader.
Senior Indonesia researcher at Human Rights Watch Andreas Harsono said there was concern for an emerging authoritarianism under Mr Prabowo's leadership.
"Prabowo is bringing back Soeharto-styled military-led governance to Indonesia, clearing more than two million hectares of forests in South Papua province, and amending the armed forces law to increase the roles of active military officers in more civilian sectors," he said.
"The failure to hold Soeharto and other abusive generals to accounts has facilitated the whitewashing and distortion of history that is now taking place under President Prabowo."
