Albanese, speaking during a press conference in Canberra, said that Australia will formally make the recognition in September, during the 80th session of the United Nations General Assembly.
"Australia will recognize a state of Palestine. Australia will recognize the right of the Palestinian people to a state of their own, predicated on the commitments Australia has received from the Palestinian Authority," he said.
"We will work with the international community to make this right a reality."
Australia's announcement comes just a few short weeks after France, then Britain, followed by Canada, made public their intentions to recognize a Palestinian state in September.
It also comes amid mounting criticism against Israel over its war in Gaza, where famine threatens. That criticism has only increased since late last week, when the Israeli government of Prime Minister Benjamin Netanyahu said it will expand its military offensive in the Palestinian enclave with plans to seize control of the entire Gaza Strip.
Albanese said Australia was making the announcement following a cabinet meeting as part of a "coordinated global effort" behind a two-state solution to the Israel-Palestinian conflict.
Netanyahu was among the world leaders to whom Albanese said he spoke about this decision.
Israel is expected to staunchly reject Australia's decision, as it did when other nations moved to recognize a Palestinian state.
During a press conference Sunday for foreign journalists, Netanyahu lambasted Australia, European nations and others considering recognizing a Palestinian state.
"Most of the Jewish public is committed against the Palestinian state for the simple reason that they know it won't bring peace," he said. "To have European countries and Australia march into that rabbit hole, just like that, fall right into it, and buy this canard is disappointing, and I think it's actually shameful, but it's not going to change our position. Again, we will not commit national suicide."
Netanyahu has staunchly opposed a two-state solution.
Albanese on Monday said it was "humanity's best hope" to end the war in Gaza.
Australian Jewish organizations have come out against their government.
The Executive Council of Australian Jewry in a statement called it "a betrayal and abandonment" of the Israelis who were taken hostage by Hamas on its surprise Oct. 7, 2023, attack.
The right-leaning Australian Jewish Association said it was "more than a betrayal of a friend" and "a reckless attack on the Jewish people in Australia and abroad."
"This position puts Australia at odds with our closest ally, the United States, and signals weakness to those who seek our harm," it said in a statement.
The decades-long conflict between Hamas and Israel exploded on Oct. 7, 2023, when the Iran-backed militia launched a bloody surprise attack on the Middle Eastern country.
In response, Israel has devastated Gaza with a massive military offensive that has killed more than 61,000 Palestinians, mostly civilians. Israel's military now controls about 75% of the enclave and late last week Netanyahu's government announced an expanded military offensive to seize control of the remaining 25%.
The plan has attracted widespread international criticism. It also comes as famine threatens to take hold of Gaza, where health officials say more than 200 people, including 100 children, have died of starvation.
Netanyahu is wanted for arrest by the International Criminal Court on war crimes charges of using starvation as a method of warfare.
As the war has dragged on, countries have turned to recognizing a Palestinian State as a form of protest.
In May 2024, Norway, Ireland, and Spain came out in support of a Palestinian State.
The United States, under President Donald Trump, a staunch Netanyahu ally, is expected to rebuke Australia, as it has other countries that moved to recognized a Palestinian state.
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