EU President Ursula von der Leyen raised the prospect of a formal defence agreement between the trading bloc and Australia during one-on-one talks with Prime Minister Anthony Albanese in Rome.
Mr Albanese said Australia would consider the proposal, but noted a similar agreement was already in place with other European countries such as Germany.
But German ambassador to Australia Beate Grzeski said a formal pact with the EU would be a significant development for the Indo-Pacific region.
"There is a broad understanding in the European Union that we have to work closely with strategic partners. It is very clear that Australia is a partner of choice and very important," she told ABC Radio on Tuesday.
"(Australia) is like-minded, supports international rules-based order and is an important player here in the Indo-Pacific, so there is a unity in the European Union about reinforcing our ties with the Indo-Pacific."
The EU has similar arrangements for defence partnerships with Japan and South Korea.
Ms Grzeski said further co-operation with the EU was crucial amid global instability.
"We are very much interested in a stable, prosperous and united Indo-Pacific and we want to also participate in that," she said.
Labor frontbencher Katy Gallagher said consolidating international partnerships was important.
"It's in Australia's interest to have good international relationships with as many countries as possible," she told Nine's Today program.
It comes as Australia and the EU have been trying to sign off on a free-trade agreement that has long been stalled.
Trade Minister Don Farrell will meet EU counterpart Maros Sefcovic on Tuesday in a bide to get the deal over the line.
Australia has been pushing Europe to drop barriers preventing the importation of Australian beef and lamb and has offered scraping a luxury car tax to get the deal over the line.
The EU has expressed willingness to budge on geographic indicators, having previously taken issue with Australian producers using terms like prosecco or feta for products when it didn't come from specific European regions.
Ms Grzeski said a free-trade agreement would be a win-win for booth sides.
"It has tremendous advantages opening up a market of nearly 450 million consumers to the Australian producers," she said.
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