For the rest of the year, the embassy will maintain a virtual presence in the cyber-savvy country, Australian Foreign Minister Julie Bishop said in a statement on Wednesday.
"Estonia is one of the most technologically advanced countries in the world," she said.
"The new embassy will develop our engagement on cyber, e-government and digital transformation, and support Australia's involvement in a number of high-level events on these issues."
Diplomat Kerin Ayyalaraju was also appointed Australia's ambassador to Estonia. Australia has previously been represented in the country by an ambassador in Stockholm.
Estonian Foreign Minister Sven Mikser, who discussed the opening with Bishop on a visit to New York, said the government was pleased with the decision.
"This will doubtlessly make Australia more prominent in Estonia and in our region on the whole," he said.
"The ambassador working at the pop-up embassy will certainly expand the already constructive and intensive cooperation that our two countries enjoy."
He also expressed hope "that Australia's positive example of this innovative pop-up embassy encourages other countries to implement similar cooperation solutions in Estonia".
Australia is home to one of the largest overseas Estonian communities with 8551 people of Estonian descent, according to a census in 2011.
