The reserves will cover 3.1 million sq km of ocean, including the Coral Sea.
Restrictions will be placed on fishing and oil and gas exploration in the protected zone covering more than a third of Australia's waters.
Environment Minister Tony Burke, who made the announcement, will attend the earth summit in Brazil next week with Prime Minister Julia Gillard.
"It's time for the world to turn a corner on protection of our oceans," Mr Burke said. "And Australia today is leading that next step."
Australia has timed its announcement to coincide with the run-up to the Rio+20 Earth Summit - a global gathering of leaders from more than 130 nations to discuss protecting key parts of the environment, including the ocean, says the BBC's Duncan Kennedy.
The plans, which have been years in the making, will proceed after a final consultation process.
Watch from Reuters: