The Opposition has criticised the changes as a massive government overreach that threatens to divide Australian society.
The Turnbull Government had hopes Labor would agree to its citizenship changes.
Immigration Minister Peter Dutton had urged Opposition Leader Bill Shorten to override what the Minister called the left of his party.
But Labor's caucus has now met to discuss its response, and citizenship spokesman Tony Burke says the decision was unanimous.
"This introduces permanently in Australia a large group of people, an increasingly large group of people, who will always live here, will never be asked to take allegiance to this country and will always be told by the Australian government they don't completely belong. Now that is a big change in how this country operates. And it's a change that Labor cannot support."
The Government's bill would increase the permanent-residency waiting time from one to four years.
Labor says that is too long.
Then there is the citizenship test itself, which would change to include questions on what the Government calls "Australian values."
It would also introduce a new stand-alone English exam, set at a more difficult level, and that is what Labor is objecting to most strongly.
Tony Burke says there is no need for new citizens to achieve the level of English required by some universities.
"A very large number of Australians will never reach the level of English that's being demanded by this test. A very large number of people who are born here will never reach the level of English in this test. What sort of snobbery leads a Government to say, 'Unless you reach university level of English, we'd rather you weren't here.'"
In Question Time, Prime Minister Malcolm Turnbull fired back.
"I'm very disappointed, Mr Speaker, that the Labor Party wants to continue to treat Australian citizenship as the outcome of an administrative process of form-filling. They object to ... they object to the proposition that Australian citizens should speak English!"
Labor says it would consider supporting a new bill that included a number of key changes.
But Peter Dutton says he thinks Labor will change its mind.
And he says he is not interested in a compromise.
"We are not going to compromise with the left of the Labor Party. The left of the Labor Party is out of step with the broader Australian public. The Australian public wants to see an increase in the English-language requirement. They want to see people meet Australian laws and Australian values."
With the Greens strongly opposed to the bill, the Government would need to convince a majority of the remaining minor parties and independents in the Senate.
Nick Xenophon, who commands three votes in the Senate, says he has misgivings about the English test.
"If the reports are true that you need to have university-level English before you can get into the country, I'm not quite sure how that's going to enhance national security."
Independent David Leyonhjelm says he is open to the plan, though.
"I think it's perfectly legitimate what the Government is doing. If it were up to me, the waiting period for citizenship would be more than four years, not just four years."
The Government is dealing with a heavy workload as it also tries to pass its so-called Gonski school reforms by the end of the week, when parliament leaves for the long winter break.
