The federal government is planning a licensing scheme to allow cultivation and distribution of medicinal cannabis.
Health Minister Sussan Ley said the government is finalising draft amendments to the Narcotics Drugs Act 1967 to allow controlled cultivation of cannabis for medicinal and scientific purposes.
Ms Ley said the changes will deliver a safe, legal and sustainable supply of locally produced product for the first time.
The government will create a licensing scheme within the Department of Health to ensure cultivation meets international obligations.
That will be done in conjunction with state and territory laws that will be discussed at the next meeting of the Council of Australian Governments.
Ms Ley said the government is sympathetic to the suffering of those with debilitating illnesses.
The absence of a mechanism for safe, legal and sustainable supply means patients and researchers have turned to overseas supplies of medical cannabis.
"Allowing the cultivation of legal medicinal cannabis crops in Australia under strict controls strikes the right balance between patient access, community protection and our international obligations," Ms Ley said in a statement.
Provision of legal cannabis to treat medical conditions appears to have broad community support.
A Greens bill now before the parliament has attracted support from across the political spectrum.
Ms Ley said the government will consult the Greens, Labor and cross-bench MPs as well as states and territories on the draft amendments. A final version will go before the parliament by the end of the year.
The government envisages that medical cannabis will only be available to patients through a doctor's prescription or a medical trial.
This does not mean legal recreational use of cannabis is any closer.
"At the end of the day, cannabis is classified as an illegal drug in Australia for recreational use and we have no plans to change that," Ms Ley said.
Meanwhile, Labor says it will work with states and territories on national medicinal cannabis laws if it wins government.
Party leader Bill Shorten said people who are terminally ill or have other medical conditions will have access to medicinal cannabis under the policy unveiled on Friday.
He said a Labor government will work with states and territories to reform criminal laws so eligible people are exempt from prosecution for possession and use.
The plan calls for the Commonwealth to become the national regulator of medicinal cannabis and for the government to establish rules for licensing one or more producers.
