The prime minister inked Fiji as Australia's fourth ally in a signing ceremony with counterpart Sitiveni Rabuka at State House in Suva on Monday.
The Ocean of Peace alliance and Vuvale Union agreement join the list of deals finalised by the Albanese government with Pacific nations.
The alliance includes mutual defence obligations, stating an armed attack on any of the parties within the Pacific "would be dangerous to each other's peace and security as well as the security of the Pacific".
"It would act to meet the common danger, in accordance with its domestic processes," the text reads.
The document also opens up the alliance to other Pacific nations.
"The parties may, by unanimous consent, invite any other Pacific state in a position to further the purposes and principles of this treaty and to contribute to the security of the Pacific," it reads.
Australia has mutual defence pacts with the US, New Zealand and Papua New Guinea, called the PukPuk treaty, which comes into effect on Wednesday.
Ahead of the alliance's unveiling, the prime minister drank kava out of a shell during a traditional ceremony, finishing it in one go.
Mr Albanese thanked Mr Rabuka for the warm welcome and for honouring Australia.
"Our countries share such strong cultural and people to people links demonstrated here today with representatives joining me from the Yolngu Nation in Northern Australia," he said.
"Our partnership is strong, from my Vuvale (family) to yours, Vinaka (thank you)."
Mr Albanese arrived in Fiji on Sunday evening.
The list of agreements signed between Australia and Pacific nations, form a key part of Canberra's diplomatic "knife fight" with China for influence in the region.
Mr Albanese will meet with his PNG counterpart James Marape, the same day the PukPuk treaty comes into effect.
In an attempt to bolster Australia's key relationships in the region, Mr Albanese will also host the leaders of PNG and Tonga in Brisbane at the final State of Origin game on Wednesday.
Following his visit to Fiji, Mr Albanese will head to the Solomon Islands to meet with his counterpart Matthew Wale after the two nations agreed to further discussions on a security deal.
While visiting Honiara on Tuesday, Mr Albanese will participate in the Solomon Islands' 48th Independence Day celebrations.
The trip follows the sealing of a long-awaited $500 million deal with Vanuatu, called the Nakamal Agreement.
Under the agreement, Port Vila agreed to close the door on foreign military bases in its territory.
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