The federal government has suspended offers of resettlement for all UNHCR registered refugees.
The Abbott government has closed the door on accepting all refugees registered with a United Nations agency for resettlement in Australia.
Immigration Minister Scott Morrison on Tuesday announced Australia will no longer accept asylum seekers who applied for resettlement after July 1 this year through the United Nations High Commissioner for Refugees office in Indonesia.
But AAP understands the ban on UNHCR applicants applies across the board to all countries and came into force on July 1.
Mr Morrison's office was unavailable to comment.
The UNHCR's Canberra office also refused interview requests.
It's believed the organisation's criticism of the Cambodian refugee resettlement deal may be a factor in the decision.
Refugee lawyer David Manne said it was an appalling move by "Fortress Australia" that would put peoples' lives in danger.
"Australia is fundamentally shirking its responsibilities to refugees," he told AAP.
"Australia is taking an isolationist approach in an international system."
The decision would damage Australia's reputation globally, particularly its bid for a seat on the UN's human rights council.
"Every time Australia goes it alone in this way and radically deviates from our international obligations, Australia damages its case to take a leadership role," Mr Manne said.
Earlier, Mr Morrison said the decision would deter people from using Indonesia as a gateway for asylum, and crush people smugglers' businesses.
"It is important that these places are not taken up by people seeking to exploit the (humanitarian) program by shopping for resettlement through a transit country," he said.
Instead, it would encourage them to stay in the first port of asylum and lodge an application from there, the minister said.
The Australian Greens said it was a hard-hearted decision that would especially affect refugees fleeing from Iraq and Afghanistan.
"It's appalling ... and cruelty writ large," Greens leader Christine Milne told reporters in Canberra.
Labor is seeking advice from the UNHCR about the effect of the change and "urgent" briefings from the government and Indonesian authorities.
Opposition immigration spokesman Richard Marles said Australia should be generous with its humanitarian intake but regional co-operation was the key to tackling people smuggling.
Indonesian Immigration Department spokesman Heriyanto told AAP his department had discussed the change in policy, which he referred to as a "moratorium".
Indonesia would continue to co-operate with the UNHCR and International Organisation for Migration, which shelter refugees and asylum seekers, he said.
"No matter what we cannot let them be neglected," Heriyanto said.
"Their hope is to enter a third country.
"If Australia rejects them it's my prediction there will be a decreasing trend of them coming to Indonesia, but that's just my prediction."
The UNHCR confirmed it had been advised of Australia's decision but said discussions on the issue were ongoing.
"We encourage resettlement countries including Australia to ensure that refugees are selected based on their protection needs, regardless of nationality, ethnicity, religion, family composition and other such factors," it said in a statement.
As of April this year, the UNHCR had recorded 10,623 asylum seekers and refugees in Indonesia, awaiting resettlement.
At that time, about 100 people were registering at its Jakarta office weekly.
By September, that number was fluctuating at around 70 to 80 each week.
The UNHCR's Indonesia representative, Manuel Jordao, told reporters in April the Jakarta office's caseload had ballooned.
Everyone who registered with the UNHCR in Jakarta was staying.
A year before, 50 per cent would not return six months after registering, presumably because they'd left by boat.
Between September 2013 and January 31 this year, 360 people were accepted for resettlement from Indonesia, most of them by Australia.
More current figures were not immediately available.