John Long, lead researcher at Museum Victoria, said the perfectly preserved skeleton has revealed that fish developed features characteristic of land animals much earlier than once thought.
Long said: "We've got a fish from the Devonian period about 380 million years ago and preserved in three-dimensional stunning perfection.
"It has revealed a whole suite of characters that link it to the higher land animals or tetrapods, so it's filling in a blank in evolution we didn't know about before."
The fossil of the Gogonasus fish, found in the remote Kimberley region of Western Australia, at a site of a former major coral reef, shows the skull had large holes for breathing through the top of the head.
The researchers said it also had muscular front fins with a well-formed humerus, ulna and radius, the same bones found in the human arm.
Long said: "The degree to which these features resemble the earliest four-legged land animals makes Gogonasus a new model in the picture of how fishes evolved into land animals.
"Gogonasus is the missing clue in vertebrate evolution, the world's first complete perfect skeleton of the kinds of fishes that gave rise to the first land animals.
"The transition from a fish living in water to an air-breathing land animal with arms and legs was one of the most dramatic transitions in the history of evolution and many unsolved questions remained."
Earlier this year, scientists reported the discovery of Tiktaalik roseae, a 375 million-year-old species of fish seen as the missing link in the shift from water to land animals.
While Tiktaalik had a skull that was identical to an amphibian, Long said Gogonasus looks much more like a fish.
He said: "I like to say it's a wolf in sheep's clothing. It's showing that evolution isn't as straightforward as we'd like to think."
The fossil was unveiled at the Melbourne Museum on Thursday and will remain on display for a month.