A top secret "cloud" will be set up for Australian security agencies to access highly classified information more easily.
At least $2 billion will be spent over the next decade setting up data centres in Australia and ongoing maintenance and usage costs.
The Australian Signals Directorate is partnering with private company Amazon Web Services to set up the cloud, which will be operational from mid-2027.
The government estimates it will create up to 2000 jobs in Australia.
The cloud will be air-gapped, meaning it won't be connected to the internet and some top secret data will still be stored with existing ASD sites.
What data will be uploaded to the cloud is still to be determined.
Everyone involved with the building and operation of the project will need to meet Australian security clearance requirements.
The technology was needed to address the complex strategic circumstances facing the nation, Defence Minister Richard Marles said.
"This cutting-edge technology will enhance defence's resilience, improve the Australian Defence Force's warfighting capabilities (and) strengthen interoperability with key international partners," he said.