The fire, which filled the stairwells of the building with smoke, caused no injuries and the team was back in the building after around half an hour, a team spokesman said.
It was the latest incident in a tense week at the Olympic Village, where Australia and several other teams complained about unfinished and dirty rooms before moving in.
"We are all accounted for," said Mike Tancred, director of media and communications for the Australian Olympic Committee, adding that the fire did not appear to have been serious.
"It was a good drill for us. We cleared all 23 floors of the building."
A spokesman for Rio's fire department declined to comment.
Kitty Chiller, the head of the Australian delegation, had complained on Sunday about exposed wiring and blocked toilets, saying accommodation at the Village was "not safe or ready" for the Games, which open on August 5.
Chiller had initially refused to let her team stay in the Village, but moved athletes in this week after organisers deployed a task force of 600 workers to tackle repairs.
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