"It is an outrage that a community established in the early centuries of the Christian era should face expulsion from their own land, simply for their faith," Dr Glenn Davies expressed in a statement.
According to reports, almost all Christians have fled the northern Iraqi village of Mosul following threats from the IS demanding they embrace Islam or pay tribute for their belief on July 17.
Churches have been ransacked or destroyed, and the homes of Christians have been marked with the Arabic letter "N", short for Nasrani which translates to 'Nazarene', a follower of Jesus.
Archbishop Davies also called for prayer and international assistance for the thousands of displaced Iraqi Christians.
"While the Cross is the symbol of suffering for all who are followers of Jesus of Nazareth, we have a responsibility to stand with our brothers and sisters in the face of such unmitigated persecution," he said.
"The Australian government, the international community and the UN must not stand by while such persecution continues unabated."
Last week, Pope Francis also prayed for an end to Christian persecution in the Middle East.
"Our brothers and sisters are persecuted, they are chased away," the Holy Father said to a crowd gathered at St. Peter's Square.
"Violence isn't overcome with violence. Violence is conquered with peace."
The Iraqi Prime Minister has also condemned the IS's murder of Christians and destruction of their homes.
"What is being done by the Daesh terrorist gang against our Christian citizens in Ninevah Province, and their aggression against the churches and houses of worship in the areas under their control reveals beyond any doubt the extremist criminal and terrorist nature of this group," Nouri al-Maliki said in a statement.
The United Nation estimates that only around 20 Christian families remain in Mosul.