The idea is to add to the variety of animals whose DNA is fully sequenced so they can be compared genetically to humans, thus shedding light on disease and basic biology.
Because the kangaroo is a marsupial and relatively distantly related to humans, differences between it and other mammals such as humans should offer insights into the biology of reproduction.
"We expect the data generated by the kangaroo genome project will prove to be extremely valuable for medical research, as well as agricultural research, around the globe," John Brumby, treasurer of the Australian state of Victoria, said in a statement on Tuesday.
The US National Human Genome Research Institute (NHGRI), part of the National Institutes of Health, announced a partnership with the Melbourne-based Australian Genome Research Facility Ltd at the BIO2004 conference in San Francisco.
"This scientific collaboration between the United States and Australia represents another important step in our quest to gain a better understanding of the human genome," said NHGRI Director Dr Francis Collins.
"We expect the data generated by the kangaroo genome project will prove to be extremely valuable for medical research, as well as agricultural research, around the globe"
Treasurer of the Australian state of Victoria
The kangaroo to be studied is the small tammar wallaby, known scientifically as Macropus eugenii, found on islands along Australia's southern and western coasts.
Marsupials such as kangaroos give birth to extremely undeveloped embryos that develop in a pouch, nursing on milk, while other mammals carry their young inside the body using a placenta to nourish it.
Marsupials last shared a common ancestor with humans about 130 million years ago, while chimpanzees, for instance, split off 7 million years ago.