Prime Minister Kevin Rudd says it makes long-term strategic and economic sense to move the navy's main east coast base from Sydney to Brisbane.
He says the move would put the navy's ships closer to where they are needed and open up Sydney Harbour for the booming cruise business.
Mr Rudd will reveal more details in a speech to the Lowy Institute in Sydney on Tuesday.
"We have been looking very carefully at the recommendations of the 2012 Defence Force Posture Review (FPR) and the 2013 Defence White Paper," he told ABC radio.
The FPR, conducted by former defence department secretaries Ric Smith and Allan Hawke and released in March 2012, examined the locations and operations of Australia's defence bases and facilities.
It said in the longer term an alternative to the existing Fleet Base East at Sydney's Garden Island could offer operational advantages, particularly for new submarines and new large landing helicopter dock (LHD) vessels.
Brisbane is the most promising location, with the necessary space and industry support, proximity to a major army base and the areas the navy will need to operate, plus attractiveness for navy recruitment and retention.
As well, Brisbane is approved for visits of allied nuclear powered warships.
"This makes strategic sense," Mr Rudd said.
He rejected suggestions from NSW Premier Barry O'Farrell it was a political decision to shore up Brisbane seats.
He said a move away from Sydney opened up an extraordinary range of possible uses for Garden Island with massive economic opportunities from the cruise ship industry, now limited because of a shortage of suitable berths for large vessels.
"This will be a controversial decision into the future but we have to be mindful of the long-term national interest," the prime minister said.
Coalition frontbencher Christopher Pyne dismissed the idea as another "Kevin Rudd thought bubble."
"It's entirely uncosted," he told ABC radio.
"It could cost anything up to several billion dollars and cost several thousand jobs in NSW."
