The government said it wanted to ensure that militants with dual nationality who were fighting overseas could not return to Australia.
The laws would also strip citizenship from dual nationals who engaged in terrorism inside Australia.
The government said changes to the Australian Citizenship Act would be introduced to parliament on Wednesday.
The new laws could be applied to up to half of the 120 Australians fighting in the Middle East with Islamic State (IS), said Prime Minister Tony Abbott.
"The legislation will update the Australian Citizenship Act 2007 to ensure dual nationals who serve or fight for terrorist groups, or engage in terrorism-related conduct inspired by terrorists groups, automatically lose their Australian citizenship," Mr Abbott said in a statement released on Tuesday.
"The Act will also be amended to ensure dual nationals who are convicted of specified terrorism-related offences automatically lose their Australian citizenship," he said.
Last month, the government said it would give the immigration minister the power to revoke citizenship in regards to terrorism activities but that option was attacked as unconstitutional by many legal experts.
Mr Abbott said on Monday the new laws would not leave anyone stateless and did not exclude the role of the courts.
"This will enable a person who has lost his or her citizenship to seek legal redress," Mr Abbott said.
"If you are convicted of a terrorist offence, again, there will be an assumption that your Australian citizenship is forfeited, should you be a dual national."
Parliament's Joint Standing Committee on Intelligence and Security will examine whether the law should be allowed to operate retrospectively.
"Given that we have a number of dual citizens currently in jail after terrorist convictions, the committee should consider whether it should have retrospective operation at least in those cases," said Mr Abbott.
He said another review would consider what to do with people engaged in terrorism who were solely Australian nationals.
Australia says it will reveal new laws stripping citizenship from dual nationals engaged in terrorism.