Draft laws setting up a digital duty of care were introduced by Prime Minister Anthony Albanese on Tuesday.
Social media companies will need to provide tools for people to choose what they see in their online feeds, under an initiative called My Feed, My Way.
"This isn't about giving government control," Mr Albanese told reporters in Canberra.
"It's about giving people control. It's about putting choice back into the hands of Australians online."
Social media companies will be also required to protect people from harmful content.
Harmful content will include the promotion of eating disorders, misogynistic content, pornography or glorifying crime.
Companies could face $100 million fines if they don't enact the duty of care.
Mr Albanese was joined by advocates including Emma Mason, whose 15-year-old daughter Tilly Rosewarne died by suicide in 2022 after being bullied online.
"This is a new era ... it's government support and we need that support," she said.
"All of us need that support at times in our lives and for children, they need it more."
The change would build on Australia's world-leading ban on social media for under-16s, Communications Minister Anika Wells said.
"In the same way that we have safety standards for cars or food or appliances, Australia is going to set basic safety standards for online tools and services," she said.
"Despite the false and baseless claims being spread, the digital duty of care is not about controlling adults online.
"You can choose if you want to opt into the algorithm as your default feed, or if you want your default feed to be filled with your friends and creators and businesses that you choose to follow."
Greens communications spokeswoman Sarah Hanson-Young welcomed the announcement after pushing for a digital duty of care during the under-16s social media ban debate.
Labor's legislation doesn't explicitly call for an opt-in or opt-out measure for algorithms, which Senator Hanson-Young said could be included in coming weeks.
"The prime minister may want an announceable for his upcoming UN trip. We need more than announceables," she said.
"We need laws that protect people, protect their freedom and protect their safety."
An opt-out measure has been the focus of a campaign by advocacy group Teach Us Consent, which has been pushing for linear social media feeds to be the default option.
Group founder Chanel Contos said the draft legislation was a great first step but urged the government to learn from mistakes made overseas.
"Half-measures are no match for Big Tech," she said.
"We've watched that play out in the EU, where mandatory opt-out legislation wasn't air-tight in its wording, leaving room for social media platforms to comply maliciously.
"We'll keep pushing until the details match the ambition."
Efforts to give social media users the choice to opt out of algorithm-driven feeds by the European Union have been circumvented by major tech companies.
Meta users who opted for a chronological feed would be reverted back to a profiled feed every time they closed the app.
Crossbenchers including independent MP Zali Steggall welcomed the duty of care, warning social media algorithms were fuelling addictive behaviours.
The coalition labelled the legislation dangerous, accusing the government of giving the minister unfettered powers to censor online content.
The laws must outline what content will be targeted, Liberal senator Sarah Henderson said.
"Any known harm needs to be a matter for the parliament, not a matter for the minister behind closed doors," Senator Henderson told reporters.
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