Prime Minister Tony Abbott has confirmed that Australia will send about 300 more soldiers to Iraq.
They will be working closely with defence personnel from New Zealand in training Iraqi troops.
Mr Abbott said the decision marked the next phase of Australia's contribution to the international coalition to disrupt, degrade and ultimately defeat Islamic State.
New Zealand is sending a 143-strong mission to help train Iraqi soldiers.
New Zealand Prime Minister John Key said the job of training Iraqi forces would be made easier with Australia's additional commitment.
The Australian Federal Cabinet has approved sending the extra troops as part of the joint training mission.
Mr Key last week announced that the New Zealand force would head to Iraq in May to help in the fight against Islamic State.
Mr Key said the proportions were about right.
"A critical mass to allow us to do the job properly of training those Iraqi forces. I think it shows you the level of commitment that Australia has. They'll now have potentially 900 people in Iraq."
Mr Key said Australia would also send force protection troops to assist both Australian and New Zealand soldiers.
The Australians already have 600 personnel in Iraq, including about 200 special forces troops who also have a training role, though that is outside the joint training mission.
Aim to take back Mosul
The Australian Government has said the joint Australian-New Zealand deployment of soldiers to Iraq will aim to train Iraqi troops to take back cities held by Islamic State, including Mosul.
Australia's Assistant Defence Minister Stuart Robert warned the re-capture of cities would be a tough task, the ABC reported.
He said the last time a city the size of Mosul - up to 2 million people - was recaptured would have been Seoul during the Korean War, and, before that, Berlin in 1945.
Mr Robert said the training was crucial because taking Mosul would require the Iraqi military to deploy up to 10 brigades.
Australia's Defence Force Chief Mark Binskin said the morale of Iraqi security forces had been decimated and undermined, and the units were fragmented.