The Therapeutic Goods Administration (TGA), the country's medical regulator, announced on Monday morning that the Pfizer vaccine met safety, efficacy and quality standards and has been approved for people aged 16 and older.
It is the first vaccine to be approved for use in Australia.
The decision was welcomed by Prime Minister Scott Morrison on Monday when he attended a press conference in Canberra.
"Our priority has always been to keep Australians safe and protect lives and livelihoods," he said.
"Today's approval is another big step forward for our community, particularly in the protection of our most vulnerable people."
Australians will receive two doses of the Pfizer vaccine at least 21 days apart.
The government is now planning to begin vaccinations in late February - slightly later than the mid-February start date it had previously announced as a result of shipment and production delays, with healthcare workers and the elderly to be given priority access.
In Australia the vaccine will be rolled out in five phases over the coming months and, over time, will involve more than 1,000 vaccination administration sites.
Greg Hunt, the minister for health, said that the TGA had "placed safety above all else" during the approval process.
"This approval and the upcoming rollout of the vaccine will play an important part in our ability to manage the pandemic in 2021," he said.
The Australian government has purchased 10 million doses of the Pfizer vaccine, enough to inoculate 5 million people against COVID-19, and more than 53 million doses of that developed by University of Oxford and AstraZeneca, which must pass TGA's assessment and approval processes.
Monday's announcement came about one year since Australia confirmed its first case of COVID-19.
According to the latest figures updated on Sunday evening from the Department of Health, Australia as of Sunday afternoon had 28,766 confirmed cases, 130 of which remain active, and 909 deaths, most of which were in aged care facilities in Victoria during the state's devastating second wave of infections.
Despite Australia's relative success in preventing the spread of the virus Chief Medical Officer (CMO) Paul Kelly said that Australians would have to learn to live with coronavirus.
"We will control it more this year than we did last year," he told the Special Broadcasting Service (SBS) in an recent interview.
"But we're going to have to learn to live with this virus. I don't think it's going to be completely eradicated anytime soon," he said. ■