The Department of Foreign Affairs and Trade (DFAT) on Friday confirmed a protest had taken place outside the embassy.
"The Australian Embassy in Dili has advised that a small-scale protest was held outside the embassy on 5 December," DFAT told AAP in a statement.
A spokeswoman for East Timor said the protest was small and non-violent.
The protesters, mostly students and young Timorese rights activists numbering about 20, carried banners reading "Australia is a thief" and "Australia has no morals", Agence France-Presse reported.
The protest comes after East Timor expressed outrage over reports that Australia secretly bugged ministerial deliberations in Dili in 2004 to gain leverage in negotiations on an oil and gas revenue-sharing deal.
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On Tuesday, Australian intelligence agents raided the Canberra office of a lawyer representing East Timor in an arbitration case at The Hague over the deal.
East Timor says it won't be deterred from challenging the multi-billion dollar oil and gas treaty with Australia despite the raid.
