Migrants wanting to become Australians will have to sit a stand-alone English language test before being allowed to apply for citizenship.
Under a raft of new measures introduced to parliament on Thursday applicants will need to prove a competent level of reading, writing, listening and speaking.
It will be up to the immigration minister to determine what level of proficiency is needed.
People aged over 60 and children under 16 will be exempt, as will those with hearing, speech or sight impairments, or permanent or enduring physical or mental incapacity.
"English language was essential to economic participation and social cohesion," Immigration Minister Peter Dutton told parliament.
"There is also strong public support to ensure aspiring citizens are fully able to participate in Australian life by speaking English, our national language."
The legislation makes several changes to citizenship requirements, as flagged by the Turnbull government in April.
The period of permanent residency will be changed from one year to four, while a new values test, and stronger character checks, will be introduced.
Other proposals include:
* Potential citizens must demonstrate their integration into the community, including by "behaving in a manner consistent with Australian values";
* All applicants would need to be of good character to be eligible for Australian citizenship; and
* The 'pledge of commitment' would be renamed the 'pledge of allegiance'.
Malcolm Turnbull said it was clear what had transpired in other countries where migration was not controlled.
"We have seen literally, in Europe, existential threats to nation states, to their political stability, to their harmony," the prime minister told parliament.
"We have seen uncontrolled and irregular migration flows threaten the very existence of nations in the world today."
But Greens immigration spokesman Nick McKim said the proposed changes radically redefined citizenship and would destabilise thousands of families.
"Australians want other people to succeed, not to fail. They want to help people join our community, not slam the door in their face," he said.
Lawyers are deeply concerned about expanded powers for the immigration minister to overrule independent citizenship decisions made by the Administrative Appeals Tribunal.
"The AAT exists to provide an important check and balance on ministerial power. This will be substantially watered down through this legislation," Australian Law Council president Fiona McLeod said.
Labor accused the federal government of "stretching" in its claims that the citizenship changes were needed for national security.
It will settle its final position at a caucus meeting on Tuesday.
Opposition citizenship spokesman Tony Burke wants people living permanently in Australia to be fully committed to the country, but warned about putting barriers in the way, such as with changes to language requirements.
"Is the impact of this legislation going to be that we end up with a permanent group of residents in Australia who will live here their entire lives, who will work here their entire lives and will always be told you don't quite belong?" Mr Burke told ABC radio.
"I'm not sure how that's good for us as a society."
