Australia will follow Britain's lead and expel a senior Israeli diplomat after a wide-ranging probe found the Jewish state was involved in the fraudulent use of Australian passports.
Foreign Minister Stephen Smith told parliament Israel's act was not what Australia would expect from a friend.
"This is not what we expect from a nation with whom we have had such a close, friendly and supportive relationship," he told parliament. Israel responded by saying the decision was regrettable.
"The embassy of Israel expresses its regret for the Australian decision," a spokesman told AAP. "We feel it is not reflective of the extensive relationship between the two nations."
But Mr Smith said the passport fraud was intolerable. "No government can tolerate the abuse of its passports, especially by a foreign government," he told reporters.
Canberra's stern action follows a wide-ranging investigation, initiated after it emerged Australian passports were used in the killing of senior Hamas official Mahmoud al-Mabhouh in Dubai in January.
The Israeli diplomat, who will not be identified, will be withdrawn from Australia within the week. But the government denies the step will harm relations over the longer term. Mr Smith said the decision wasn't an act of retaliation for the passport abuse.
"This decision is made much more in sorrow than in anger," he told reporters.
Australia informed Britain and the United States ahead of the announcement, as well as other key nations, including the United Arab Emirates - where the murder occurred - and France, Germany and Ireland, which were also victims of passport fraud.
Australia's ambassador in Tel Aviv was alerted to the government's decision on Sunday night and would meet Israeli officials.
"She will be providing Israeli officials in Tel Aviv at the opening of business with all of the information that I've made public," Mr Smith said.
The national security committee of cabinet was notified on Monday morning.
Canberra's decision, following Britain's response, will be an uncomfortable matter for the US, Israel's closest friend.
The US embassy was not immediately available for comment.
The investigation by the Australian Federal Police, aided by the nation's security agencies, found the high-quality counterfeiting of the passports pointed to the involvement of Israel's state intelligence service. "Investigations and advice have left the government in no doubt Israel was responsible for the abuse and counterfeiting of these passports," Mr Smith said.
The fake Australian passports used were in the names of Nicole McCabe, Joshua Bruce, Joshua Krycer and Adam Korman.
