The Prime Minister says the new visas will cut the present list of eligible occupations by about 200.
He says some 95,000 457 visa-holders will be able to remain in Australia under their current visa conditions.
Immigration Minister Peter Dutton says the change is an attempt to clean up Labor's mess.
"Labor presided over a policy which got out of control, by their own admission, and what we are doing is making some significant changes in abolishing the program but also introducing a temporary skilled shortage visa through two streams, one a short-term and one a medium-term, and by doing that we restore integrity to this visa program," he said.
Earlier the Turnbull Government had seized on figures showing Opposition Leader Bill Shorten approved almost 70,000 457 visas when he was Employment Minister in the Gillard/Rudd governments.
Bill Shorten says there was a mining boom when he was minister that required an unusually large influx of temporary skilled workers.
The Australian Bureau of Statistics says primary visa applications dipped by 3.5 per cent last year, while the number of primary 457 visa-holders in Australia fell from almost 104,000 to just under 95,800.
Almost a quarter of the 457 visa-holders came from India, and 19 per cent from the United Kingdom.
