Appearing on last night's Q&A program on ABC, Mr Turnbull was asked via video by a detainee on Manus Island why the detainee could not come to Australia.
The Prime Minister said any relaxation of his policy would put people smugglers back in business.
In his first appearance on ABC's Q&A program since becoming prime minister, Mr Turnbull has faced tough questions from voters in the lead-up to the July 2 election.
One of those questions came from an Iranian-Kurdish asylum seeker on Manus Island.
Appearing by video, Behrouz Boochani, a journalist in his working life, asked the Prime Minister why he was still in prison after three years.
"What is my crime? I am a refugee who fled injustice, discrimination and persecution. I didn't leave my family by choice. Why am I still in this illegal prison after three years?"
Mr Turnbull, battling a heavy cold on the night, told the audience Mr Boochani is free to settle -- but not in Australia.
"A person who has been found to be given refugee status in (Papua New Guinea) is able to then settle in PNG. I know, I'm sure, he would rather come to Australia, but that option is not available to him."
Mr Turnbull acknowledged his Government's policy of offshore processing is harsh.
But he argues any relaxation would put people smugglers straight back in business.
"None of us have hearts of stone. All of us understand how harsh it is, our policy is, in terms of its impact on particular individuals. (But) the people smugglers are out of business. They would love to get back into business. They are itching to get back into business, believe me. And every now and then, they test us out. But we have kept our policy firm. We have had no unlawful arrivals, no unauthorised arrivals, no people-smuggling expedition successful, for well over 660 days. It is a very long time."
Mr Turnbull says allowing asylum seekers to settle in Australia would be a huge marketing opportunity for people smugglers.
And he says it would ultimately lead to more drowning deaths.
"The boats would be setting off again, it would be starting up. They would say, 'Look, you know, get into the boats, give us $5,000, and don't worry, the Australians will let you in.' And it would all start again. Any weakness on our part will be exploited by them, and the consequence will be women and children and families drowning at sea. It's a tough choice, but that's my job to make tough choices, to defend Australia, to defend the integrity of our borders."
Mr Turnbull says the alternative to the Government's tough stance is not a theoretical consideration.
He says, when Labor eased the Howard Government's policy, 50,000 people arrived by boat, with at least 1,200 and, likely, many more drowning at sea.
"Now I grant you, it is tough. It is tough. But the alternative is far worse, and that is what I, as prime minister ... that's the tough choice that you entrust me to make as this nation's leader."
