Prime Minster Abe is on a three-day visit in Australia, the first visit by a Japanese prime minister since 2002.
In an address to the House of Representatives he paid tribute to the ties between the two countries.
"Our countries both love peace. We value freedom and democracy," he said.
The speech is only the third speech Mr Abe has delivered in English as prime minister.
Outside Parliament, a group of between 100 and 150 people gathered in a protest against Abe's visit.
The protesters cited concerns over historical grievances relating to WWII and planned changes to the country's constitution.
Japan's government recently announced it was changing its post-war pacifist constitution to enable the country's military to come to the aid of an ally under attack.
“Australia selectively forgot the crimes Japanese conducted to Australian war prisoners,” one protester said on social networking site Weibo.
Another said: “While older generation of Australians still hold some conflicting feeling against Japan – given they had attacked Darwin – the younger ones don't know much."
"Same complicating as Australian’s feeling to Chinese, on one side is red communism and on the other side is our mining boom…Mr Abbott, it is complicating to play seesaw!"
Shinzo Abe tells parliament of peace vow
Mr Abe has told Australian parliament Japan will never again follow the path of aggression and war.
"When we Japanese started out again after the Second World War, we thought long and hard over what had happened in the past and came to make a vow for peace," he told MPs and senators.
"We Japanese have followed this path until the present day.
"We will never let the horrors of the past century's history repeat themselves."
Mr Abe said that vow was still fully alive today and would never change.
"I stand here in the Australian legislative chamber to state this vow to you, solemnly and proudly."
Mr Abe paid tribute to the fathers and grandfathers who fought in places such as Kokoda and Sandakan.
Japanese Prime Minister Shinzo Abe addresses the Australian Government in the House of Representatives. (AAP)
"How many young Australians with bright futures to come lost
their lives?"
Prime Minister Tony Abbott said Mr Abe's speech was a historic occasion for Australia.
He said Australia had a special relationship with Japan based on common values and shared interests.
Mr Abbott and Mr Abe will sign an Australia-Japan free trade agreement later on Tuesday.
- with AAP
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