Australia will join the China-led Asian Infrastructure Investment Bank (AIIB) as a founding member and contribute A$930m (£455m, €639m, US$718m) to become its sixth-largest shareholder.
A joint media release from the minister for Foreign Affairs Julie Bishop and treasurer Joe Hockey confirmed the country's membership in the $100bn bank, which is expected to begin operations by the end of 2015.
"Joining the AIIB presents Australia with great opportunities to work with our neighbours and largest trading partner to drive economic growth and jobs," the statement said.
"The AIIB will work closely with the private sector, paving the way for Australian businesses to take advantage of the growth in infrastructure in the region."
The decision comes after extensive discussions between the government, China and other "key partners around the world".
Hockey said Australia will contribute A$930m to the bank over the next five years, making it the sixth-largest shareholder.
"We look forward to working with other members to lay the foundations for an effective new multilateral institution which is expected to be operational by the end of the year," the statement added.
In an interview with Sky News, Hockey said that Australia was now confident that China "will ensure that there is appropriate transparency and accountability in the bank".
The Treasurer will attend the AIIB's Articles of Agreement signing ceremony in Beijing on 29 June.
In October 2014, representatives of 21 Asian nations convened in Beijing to inaugurate the AIIB, which is focused on providing funding to infrastructure projects within Asia. The AIIB will have paid-in capital of $20bn with total authorised capital of $100bn.
A total of 57 countries across the globe have joined the AIIB as its prospective founding members.
Britain became the first major Western country to apply to become an AIIB founding member, and was followed by major European nations including France, Germany, Luxembourg, Switzerland and Austria.
The decision of the countries, most of which are close allies of the US, came despite warnings from the US over the AIIB's governance and environmental standards. The US and Japan are the major economies that have stayed out of the institution.