Prime Minister Anthony Albanese said leaders had agreed to the Pacific Policing Initiative, which would create up to four regional training centres and establish a multinational crisis reaction force.
It would reportedly create a force of some 200 officers that would be dispatched to regional hot spots and disaster zones as needed.
"This demonstrates how Pacific leaders are working together to shape the future that we want to see," said Albanese, hailing the agreement.
But representatives from Vanuatu and Solomon Islands -- among Beijing's closest allies in the region -- have voiced concern that the policing plan represents a "geo-strategic denial security doctrine" designed to box out China.
Australia has historically been the region's go-to security partner, leading peacekeeping missions in Solomon Islands and training in Nauru, Fiji and Papua New Guinea.
Policing, however, has increasingly become a cornerstone of Beijing's efforts to build Pacific influence.
China has been plying under-resourced Pacific police forces with martial arts training and fleets of Chinese-made vehicles.
It already maintains a small but conspicuous police presence in Solomon Islands, sending a revolving cadre of officers to train locals in shooting and riot tactics.
The creation of such a force could seriously hamstring China's efforts to ink policing and security agreements with Pacific states.
Papua New Guinea's Foreign Minister Justin Tkatchenko told AFP on Wednesday that his country was keen to "work together with Australia" to implement the proposal.
But top Solomon Islands' diplomatic official Colin Beck told AFP that Honiara would have domestic discussions about the plan before anything is finalised.
"We have a national process that we have to dive into it," said Beck, permanent secretary of the Ministry of Foreign Affairs.
"We are basically reviewing our national security strategy and everything, so it will be part of the conversation."
"The matter is still going on. The forum is not yet done."
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