The prime minister hailed the nations' deep ties and shared values after meeting with his Israeli counterpart Benjamin Netanyahu in Jerusalem on Monday night.
But the leaders still don't see eye-to-eye on Iran despite lengthy discussion, with Mr Turnbull reiterating Australia's view to stick with the nuclear agreement which the Israelis want to end.
The pair embraced warmly during a ceremonial welcome alongside their spouses, before holding one-on-one and bilateral meetings.
"Malcolm, welcome both of you to Jerusalem," Mr Netanyahu said.
"I thank you for being part of our 'mishpacha' (family)."
Mr Turnbull said collaboration between Australia and Israel had deepened over the century and was now at its height.
But their shared values of freedom, democracy and the rule of law were being tested by "militant Islamist terrorism" - both in the Middle East and closer to home in the Philippines.
"It is a threat to Israel, it is a threat to Australia, it is a threat to all who value and cherish freedom," he said.
Officials signed a memorandum of understanding to allow for more co-operation between the two nations' defence industries, including potential export opportunities.
The leaders also pledged greater co-operation on cyber security issues.
"We have a vital interest in working more closely and intensely together to keep our people safe from terrorism and from the use of the internet," Mr Turnbull said.
The issue of Iran was discussed at length, after US President Donald Trump refused to certify Iran's compliance with the deal - a move Israel supports.
"We absolutely understand Israel's very real concerns and anxiety about Iran moving to a nuclear weapons capability," Mr Turnbull said.
"But we are not dissuaded that moving away from the agreement would be beneficial in terms of preventing that type of proliferation."
Mr Netanyahu and Mr Turnbull, who later privately dined together with wives Sara and Lucy, both acknowledged the centenary of the Battle of Beersheba - which will be commemorated with a series of events on Tuesday.
Mr Turnbull described it as a pivotal moment in history, led by Australian horseman who - some on their own horses - helped liberate Palestine from the Ottoman empire.
"It was a great victory - the last successful calvary charge in military history and certainly one that rings through the ages," he said.
Mr Netanyahu labelled it the "gateway to the rebirth of the Jewish people".
"(It) would not have been possible without the heroism and sacrifice of Australian troops who liberated this land from 400 years of Ottoman rule with tremendous courage," he said.
