Prime Minister Tony Abbott said even a small number of illegal firearms could have a significant impact on crime on the streets.
"Illegal guns are being imported and distributed throughout our country," he told a law and order meeting in Melbourne.
"Light sentencing sends the wrong message. Criminals need to know they will face the full severity of our law."
The government will introduce legislation to create uniform minimum five-year jail terms for firearms trafficking.
The Australian Crime Commission estimates there are about 10,000 illegal unregistered handguns and up to 250,000 unregistered longarms in the community.
Mr Abbott said the government had increased funding to Customs to boost inspections of incoming mail and cargo.
"We don't just have to stop criminals coming into our country. We need to stop the means of criminal activity coming into our country," he said.
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