Defence Minister Linda Reynolds has opened the first phase of the expanded naval base at Lombrum on Manus Island, it has been reported.
Australia has been working with the US and Papua New Guinea to upgrade the strategically significant deep water port into a key staging point into Asia.
The base will host Australian and US naval ships as part of a deal signed with Papua New Guinea, and is seen as a potential counter to China's rising influence in the contested South China Sea.
Manus Island now has a new wharf, facilities for maritime infrastructure and long-range communications, and troop barracks, News Corp reports.
The Australian Navy and Air Force have also been involved in training PNG forces and overhauling local aircraft, and four patrol boats are set to be gifted to the Pacific nation.
"It has always been a very strategic location in our region and this is a base the Papua New Guineans have identified that they would like to further develop," Senator Reynolds told News Corp.
"This is strategically important ... in a military context it has always been important and remains so."
Senator Reynolds said the defence deal with PNG was worth $42 million per year and included training, infrastructure and hardware.
Base commander Peter Tupma claimed the expansion was necessary.
"The world is shifting and there are power plays in our region and we are very blessed to be in partnership with Australia," he said.
Australian Associated Press