The former Melbourne man is reportedly alive and under arrest by Turkish authorities despite reports he was killed six months ago in northern Iraq.
Prakash, who is linked to several failed Australian terror plots to kill innocent citizens, was only injured, not killed in Mosul on April 29, as previously announced, The New York Times reports.
Jacinta Carroll, director of the Counter Terrorism Policy Centre at the Australian Strategic Policy Institute, believes it likely Australia will be given priority to prosecute the senior militant, given his influence and links to attacks here.
"Australia has a very strong case to have him prosecuted for offences committed under Australian law," she told the ABC.
The ABC reports Prakash was arrested by Turkish authorities several weeks ago after being contacted by Australian officials who believed they had intelligence he was planning to enter the country.
Ms Carroll said a number of countries would be interested in Prakash's knowledge, given he has been implicated in a number of plots and would have links to other activities.
"They also may have him implicated in crimes in their own countries as we do in Australia," she said.
Prakash was linked to a failed Melbourne plot to behead a police officer on Anzac Day last year and Numan Haider, an 18-year-old who was killed after stabbing two police officers in Melbourne in 2014.
Australian authorities would be now seeking to proceed with Prakash's arrest warrant for foreign fighter activities and involvement in crimes on home soil, Ms Carroll said.
Most importantly, authorities would be trying to find out other Australians he was involved with at home to facilitate attacks and recruit to the Middle East.
Prime Minister Malcolm Turnbull in May named Prakash the most senior Australian operative in IS.
On Friday, Counter Terrorism Minister Michael Keenan did not say whether the government had any fresh information from the US about Prakash.
