The federal government will grant $10 million in aid to Somalia for state building and stability efforts.
Australia will pledge $10 million in aid to war-ravaged Somalia.
Foreign Minister Julie Bishop says $2 million will be given to support the African Union Mission to Somalia (AMISOM) to combat terrorism, while a further $8 million will be granted for humanitarian efforts such as water access and medical care.
Ms Bishop said enhancing Somalia's stability was in Australia's national interest.
"It will help combat terrorism, improve stability in the Indian Ocean Rim and reduce piracy along important trading routes for Australia," she said in a statement on Monday.