Malcolm Turnbull says the new visa category would comprise two streams with additional requirements - including that jobs are advertised domestically before being available to overseas applicants.
Mr Turnbull says a higher degree of English proficiency would also be required, as well as prior work experience and new criminal record checks.
In addition, the federal government has pledged to reduce the list of over 200 nominated occupations.
Mr Turnbull says the proposed changes are designed to help Australian businesses and workers.
The government says some 95-thousand 4-5-7 visa-holders will be able to remain in Australia under their current visa conditions.
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