Asylum seekers sent to Manus island as part of a proposed 3000-capacity asylum seeker processing centre will not be settled in Papua New Guinea.
Manus Island MP Ronnie Knight said the proposed regional hub facility will be used strictly for processing refugee claims.
"There is no mention of resettling anybody in Papua New Guinea," Mr Knight told AAP.
"Our policy will not be to settle asylum seekers here, but we will be facilitating them to go to other, third countries."
Mr Knight said he spoke with PNG Prime Minister Peter O'Neill about the plan on Friday morning.
Mr O'Neill is believed to be meeting Australian Prime Minister Kevin Rudd in Brisbane on Friday afternoon to announce the plan.
"The first thing I heard of it was this morning," Mr Knight said.
"He said, 'How do you feel about it?' he said 'what do you want?'."
Mr Knight said he wants the Australian Navy to take over the running of Lombrum Naval base, where the current, temporary asylum-seeker facility is based.
He said both countries would benefit from mutual naval training, as well as tackling people smugglers and illegal fishing operations.
He also wants Momote airport expanded to international grade, and its runway lengthened.
He said he also wanted locals employed in security roles, "not like now where G4S is flying in mainlanders.
"This is not going down well with locals," he said.
Speculation of an expanded processing centre regime in PNG has been rife since Mr Rudd made a lightning 21-hour visit to Port Moresby earlier in the week.
On Thursday night, Mr O'Neill's staff denied he was flying to Brisbane on Friday to meet with Mr Rudd.
However, the PNG consulate in Brisbane told AAP on Friday Mr O'Neill was expected to land there around 2pm AEST, where he will meet Mr Rudd.
Mr Knight said he was happy with the plan, but there needed to be changes to the way the program is run.
There are currently 215 asylum seekers housed on Manus' Lombrum naval base.
Mr O'Neill, in his capacity as acting police minister, had ordered PNG's police mobile squad removed from Manus following the bashing death of a man last week.
Mr Knight said he hoped a plan by the Australian government to send 50 police officers to PNG will help stop such incidents occurring in the future.
Late last year and in early 2013, there were numerous incidents, including self harm, assault and an escape attempt at the facility.
Earlier this year, the police charged 19 asylum seekers with assault following an incident on Christmas Day.
Since November, asylum seekers have been housed in tents in conditions that have been heavily criticised by the United Nations refugee agency and rights groups.
Ground was expected to be broken on a 600-strong facility in late July.
Two weeks ago, a PNG court dismissed a constitutional challenge brought by the opposition against the Manus Island detention centre.
Lawyer Loani Henao, who represents opposition leader Belden Namah, has said he intends to bring the challenge again using a different legal mechanism.
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