Nauru has agreed to temporarily take refugees from Papua New Guinea awaiting resettlement elsewhere, the Immigration Department has confirmed.
"Relocation is voluntary - no one will be forced to move to Nauru," a department spokeswoman said in a statement.
A note appeared at the Manus Island detention centre on Tuesday night advising refugees of the transfer option.
The detention centre is slated for closure at the end of this month.
More than 1600 refugees on Manus Island and Nauru have expressed interest in the US refugee resettlement deal.
So far just over 50 have travelled to America, with up to 1200 more to follow over coming months.
Labor spokesman Shayne Neumann said transferring refugees from Manus Island to Nauru was a "glaring admission of failure" by the government.
"Transferring up to 700 refugees from one centre to another is not a long term solution - these people urgently need viable third country resettlement options," Mr Neumann said.
He said there was no guarantee adequate services such as security, food and health care, would be available.
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