Australia will contribute $100 million annually for three years beginning in 2015 toward the $4 billion a year cost of running the Afghan National Security Forces after they take responsibility for their country's security.
Prime Minister Julia Gillard and Defense Minister Stephen Smith said in a statement Wednesday they will take this commitment to the NATO and U.S.-led International Security Assistance Force summit in Chicago on Sunday and Monday.
This follows Australia's commitment to the Afghan National Army Trust Fund of $200 million over five years beginning in 2009-10.
Afghanistan will have responsibility for its own security by the end of 2014.
Gillard said she spoke by telephone to President Barack Obama late Tuesday about the size of the Australian financial contribution to the costs of the Afghan forces.
"That's going to cost some money to sustain those forces, just over $4 billion," Gillard told reporters. "Australia is prepared to play its part in meeting those costs for Afghan forces."
"As a nation, we have invested a lot in Afghanistan. We have been there to make sure that it is never again a safe haven for terrorists," she added.
The White House said Obama had "expressed appreciation for Australia's significant contributions" in Afghanistan during his phone conversation with Gillard.
Australia has 1,550 troops in Afghanistan and is the largest military contributor to the campaign outside NATO.
Australia also contributes the third largest number of Special Forces elite troops. Wednesday's statement said Australia will consider an ongoing Special Forces presence in Afghanistan, if requested, after the Afghans take control.
The Australian statement said the government will maintain a substantial development assistance program in Afghanistan beyond 2014 to help provide services such as education and health.