The area will cover 3.1 million square kilometers (1.2 million square miles) of ocean including the entire Coral Sea, and encompass a third of the island continent's territorial waters.
Environment Minister Tony Burke said Thursday the government expects to pay an estimated 100 million Australian dollars ($100 million) to the fishing industry in compensation for the new restrictions on their operations that will take effect late this year.
Highly protected areas such as the Coral Sea off Australia's northeastern coast and the adjoining World Heritage-listed Great Barrier Reef will also be protected from oil and gas exploration. Both areas, which cover a total 1.3 million square kilometers (500,000 square miles), have shallow reefs that support tropical ecosystems with sharks, coral, sponges and many fish species.
The numbers of marine reserves off the Australian coast will be increased from 27 to 60.
Burke said he wanted the reserves to set a benchmark for the world in environmental protection and food security—the access to and consistent availability of food. The plan aims to guarantee future fish stocks by preventing overfishing.
"We have an incredible opportunity to turn the tide on protection of the oceans and Australia can lead the world in marine protection," he said.
Don Henry, chief executive of the environmental group Australian Conservation Foundation, said the plan will make Australia a global leader in ocean protection.
But he warned that the remote northwest region where an offshore oil and gas industry is already established had been left vulnerable to the threats of further energy exploration.
Rachel Siewert, a senator for the environmentally focused Greens party which supports the center-left Labor Party minority government, described the plan as a "cave-in to the oil and gas industry."
Judy Lynne, chief executive of the recreational anglers' group Sunfish Queensland, said the ban on commercial operations in the most environmentally sensitive areas would result in more foreign trawlers fishing illegally.