Prime Minister Tony Abbott has backed US President Barack Obama's action in Iraq.
President Obama has authorised US air strikes on Iraq and humanitarian supply drops to prevent a "genocide" by Islamist extremists against minorities.
Mr Abbott said the terrorist group Islamic State, formerly known as ISIL or ISIS, had emerged as a major threat in Syria and Iraq.
"If it is allowed to succeed in carving out a terrorist state in the Middle East it will also pose a significant threat to international security," Mr Abbott said in a statement on Friday.
He understood the air strikes were intended to support US personnel located in Erbil and also to break the ISIL siege of Sinjar.
"The Australian government is extremely concerned by the threat posed by ISIL and the even greater threat it will pose if it succeeds in its latest offensive," Mr Abbott said.
"Therefore we strongly support President Obama's course of action."
He said it was no longer an evil terrorist group but a "highly potent insurgent army" capable of holding territory, imposing its "abhorrent form of government" and forging alliances with other extremist organisations.
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