The law, to be introduced to parliament in the coming week, would bring in jail sentences of up to six years for sharing non-consensual deepfake pornography.
The penalty rises to seven years if the offender also created the material.
"Digitally created and altered sexually explicit material that is shared without consent is a damaging and deeply distressing form of abuse", Attorney General Mark Dreyfus said in a statement late Saturday.
"We know it overwhelmingly affects women and girls who are the target of this kind of deeply offensive and harmful behavior. It can inflict deep, long-lasting harm on victims."
The new criminal offense would only apply to adults since children are already protected under separate child abuse legislation.
Countries around the world are grappling with the spread of deepfake pornography -- digitally created sexually explicit material, usually generated with artificial intelligence.
In April, Britain said it would criminalize the creation of sexually explicit deepfake images without consent, with plans for unlimited fines and even jail if the image is widely shared.