Christians who have fled their homes as jihadist militants, Islamic State (IS), execute those refusing to convert to Islam will receive Special Humanitarian Visas as part of the nation's refugee intake program, Immigration Minister Scott Morrison announced in a statement on Wednesday.
"My department is closely monitoring the situation and considering options under the offshore humanitarian program to assist victims of the crisis," he said.
Treasurer Joe Hockey told ABC NewsRadio that unless immediate action was taken, the world would be witness to genocide on a scale unseen for a long period of time.
"We have to stop the systemic slaughter of people wherever it might be in the world," he said.
The decision follows calls from Anglican church leaders and the Australian Christian Lobby to offer asylum to Iraqi Christians.
"The Government is responding with compassion in the midst of unspeakable barbarity," ACL Managing Director Lyle Shelton said following the announcement.
"Sadly this crisis does not look like ending anytime soon. I am sure the government will keep the humanitarian situation under review," he stated.
Under the nation's current intake, 13,750 places are offered annually to refugees, with 4000 spots reserved for those in "desperate circumstances".
Reports have revealed the brutality of the IS regime with insurgents now crucifying, beheading and burying people alive.
An estimated 200,000 Christians and other minorities are now seeking refuge.
"The suffering is immense," Archbishop Philip Freier said. "The refugees need food, water, clothes, medical supplies and much more."