Foreign Minister Marise Payne says Australia's concerns about Israeli plans to annex parts of the West Bank have been raised directly with her counterpart in Tel Aviv.
In a statement on Wednesday evening Ms Payne said Australia urged all parties to refrain from actions that diminished the prospects for a negotiated two-state solution.
Israeli Prime Minister Benjamin Netanyahu has said he intends to extend Israeli sovereignty to Jewish settlements and the Jordan Valley in line with a blueprint announced by US President Donald Trump in January.
Palestinian leaders, the UN, European powers and Arab countries have denounced any annexation of land that Israeli forces captured in 1967.
"The Australian government is a longstanding supporter of a two-state solution, in which Israel and a future Palestinian state coexist, in peace and security, within internationally recognised borders," Ms Payne said.
"We urge all parties to refrain from actions that diminish the prospects for a negotiated two-state solution, including acts of violence and terrorism including rocket attacks on civilians, and land appropriations, demolitions, and settlement activity."
Ms Payne said Australia was following with concern possible moves towards the unilateral annexation or change in status of territory on the West Bank and she had raised those concerns directly with her Israeli counterpart.
"The focus needs to be on a return to direct and genuine negotiations between Israel and the Palestinians for a durable and resilient peace arrangement, as soon as possible."
Earlier on Wednesday British Prime Minister Boris Johnson warned Israel not to go ahead with any annexations, saying London would not recognise any changes to the 1967 lines.