Iraqis who have worked for Australia's defence forces in Iraq, or for the Australian embassy in Baghdad, will be offered permanent residence in Australia when our troops pull out in June.
About 100 Iraqi interpreters and other staff will be eligible for the deal, approved by Cabinet because of concerns about their safety.
Their immediate families will also be able to come to Australia, bringing the total number of people involved to as many as 600.
They will be invited to apply for entry to Australia under a special visa category.
Cabinet has decided there is a moral obligation to look after the welfare and security of Iraqi nationals who have helped Australian troops.
Numerous interpreters associated with coalition forces in Iraq have been kidnapped, tortured or killed since the invasion of Iraq five years ago.
A senior defence official says: "We're really worried about the safety of the people who work for us.
"We have seen many examples over the last few years where working for the coalition can have some pretty dire consequences."
The question of whether interpreters working for the Australian army should be offered sanctuary after the battle group leaves southern Iraq was first raised last year, when Danish troops pulled out of Basra.
Iraqis placed at risk because of their association with the Danish Battalion were invited to apply for entry permits to Denmark and promised asylum.
Iraqi interpreters employed by the Australian contingent asked if Australia would offer a similar deal. Cabinet has now given the green light.
The Baghdad government was told of the decision by cable via the Australian embassy in Baghdad today.
A 30-strong Australian team from the defence forces and the immigration department, and including doctors, has been assembled to process the Iraqis who take up the offer.
Several immigration department staff have been undergoing security training in Kuwait in preparation for the mission.
Some members of the team will go to the Australian base at Tallil in southern Iraq and to Baghdad. Others will be sent to Jordan and Syria to help the Iraqis when they cross the border.
There is some urgency because the 550 troops in the Australian battle group are due to leave by the end of June.
A major political row erupted in London last year when the British Government refused sanctuary to interpreters said to be facing death threats because of their work for UK forces in Iraq.
Prime Minister Gordon Brown was forced to order a review of the decision.
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