Agriculture, Fisheries and Forestry Minister Tony Burke made the announcement in Melbourne today (10 August).
Labor fist promised to introduce such legislation during the 2007 federal election campaign.
Illegal timber products including sawn timber, wood panels, composite products, wooden furniture and pulp and paper items will be targeted.
Around ten per cent of all of Australia's timber imports are thought to come via illegal logging.
Greenpeace has welcomed the news, noting in a statement that "after ten years of campaigning, we are on the verge of a significant win for ancient forests".
Greenpeace estimates that Australia imports nearly $1 billion of illegal timber from the last remaining rainforests of countries like Papua New Guinea and Indonesia.
In June, the US Environmental Investigation Agency (EIA) urged Australia to ban the import of illegally logged timber, after the USA introduced its own legislation. The EIA believes revenue from illegal logging helps to fund the activities of terrorist groups.
Last month the European Parliament voted to ban the import and sale of timber obtained through illegal logging.