The Australian Federation of Islamic Councils said the federal government's commitment to take action on 35 of 54 recommendations outlined in special envoy Aftab Malik's report recognised anti-Muslim hate as a serious national problem.
But the group, the nation's peak body for Muslims, said the response fell short in key areas and called for further detail on how leaders planned to respond to all of the special envoy to combat Islamophobia's recommendations.
The response amounted to a limited number of new commitments alongside a grab-bag of expansions to existing programs and work already being undertaken by the envoy's office, the federation said.
"Presenting these measures together makes the overall package appear more substantial than it may in fact be," president Rateb Jneid said.
"The community is entitled to know what is genuinely new, what was already under way and what additional resources the government has committed as a direct result of the special envoy's report."
The measure of success would not be the number of existing programs assembled under the banner of a response, Dr Jneid said, but the extent of new action and investment and whether Muslim Australians felt safer.
Measures promoting social cohesion in education, including a review to strengthen religious and racial tolerance, along with workplace training for politicians and public servants, were among a series of measures adopted by the government.
However, Mr Malik's calls for an independent review of counter-terrorism laws, along with a commission of inquiry into Islamophobia, anti-Palestinian and anti-Arab racism, went unanswered 10 months after the report was handed to the government.
"Where the government has acted, I will support that progress," the special envoy said on Saturday as the response was released.
"Where recommendations remain outstanding, I will continue to advocate for them."
The Alliance of Australian Muslims and the Australian National Imams Council labelled the response "an unprecedented and important step in the right direction" towards addressing Islamophobia, while calling for more to be done.
"Australian Muslims must be able to see and experience real improvements in their safety, protection, inclusion and ability to participate fully in Australian society without fear of discrimination or hostility," the groups said in a joint statement.
Opposition frontbencher Andrew Bragg said Islamophobia was a "serious issue" but of less importance than rising anti-Semitism.
"Unfortunately, inside a multicultural society, you do sometimes see instances of wrongdoing against small parts of the community," he told the ABC's Insiders program.
"I make the point that the only Australians that have to live in cages are Jewish Australians, and that's why there's a royal commission on the back of a massacre against Jewish Australians who were commemorating Hanukkah at Bondi Beach."
The government has committed to reviewing the Australian school curriculum to identify opportunities to strengthen understanding of all forms of hatred.
There will also be targeted funding to bolster the security of Muslim institutions, including $41.9 million for initiatives to improve security at faith-based places.
Multicultural Affairs Minister Anne Aly said the response was a milestone moment, adding her government was the first in Australian history to recognise Islamophobia as an immediate threat to the community.
''(The government recognises) it is dangerously close to becoming normalised and that it has traumatising, detrimental, and long-lasting effects on a significant number of Australians,'' she said.
"Islamophobia is harmful and causes lasting damage to individuals, communities and to the social fabric of our country."
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