The Australian Prime Minister, Kevin Rudd, has said that no more boatpeople will be allowed to resettle in Australia.
Unauthorised arrivals will be sent to poverty-stricken Papua New Guinea, according to a new agreement between the two countries.
"From now on, any asylum seeker who arrives in Australia by boat will have no chance of being settled in Australia as a refugee," Rudd told reporters on Friday.
Rudd and Papua New Guinea Prime Minister Peter O'Neill signed an agreement in the Australian east coast city of Brisbane on Friday that will enable Australia to deport refugees to its neighbour.
The agreement will initially be in effect for 12 months and reviewed annually.
Australia pledged to help genuine refugees settle in Papua New Guinea - a diverse tribal society of more than 800 languages and 7 million people who are mostly subsistence farmers.
Asylum seekers arriving at Australia's far-flung Christmas Island will be sent to the Manus Island processing centre on Papua New Guinea and elsewhere in the country for assessment.
In exchange for their cooperation, Papua New Guinea will get extra foreign aid from Australia in a range of areas including health, education and law and order.
Those whose applications are not successful would be sent back home or to third countries.
"If they are found to be genuine refugees, they will be resettled in Papua New Guinea," Rudd said.
O'Neill set no limit on how many asylum seekers his country was prepared to accept.
The aim is to pose a strong disincentive for people considering the dangerous boat journey usually from Indonesia, particularly so-called "economic migrants" who make the trip not to flee persecution but for a better life in Australia. Hundreds have died in sea accidents during the dangerous journey.
The move was described by Rudd as "very hard line".
"In the period ahead, our governments intend to make sure that the message is delivered loud and clear to people-smuggling networks around the world and those criminal elements within Australia who may be supporting them, that the hopes that they offer their customers for the future are nothing but false hopes." said Rudd.
Australia has struggled to prevent an influx of asylum seekers arriving by boat, with record numbers turning up to 17,202 in 2012, 15,728 so far in 2013.
Since 2001, around 1,000 people have died while trying to reach Australia's Indian Ocean territory of Christmas Island on unseaworthy refugee boats. In the most recent incident, a boat sank on Tuesday, killing four people.
Canberra's plans to send asylum-seekers to remote Pacific islands for processing has so far failed to stop the flood.
The Australian Immigration Minister, Tony Burke, said the rule would apply to refugees who arrive from Friday on.
The growing number of asylum seekers poses a major political problem for Rudd's Labor Party in elections.
Rights group critical
Rights group Amnesty International condemned the new plan, and said Australia had shown contempt for its legal and moral obligations.
"Mark this day in history as the day Australia decided to turn its back on the world's most vulnerable people, closed the door and threw away the key," said Amnesty's regional refugee coordinator, Graeme McGregor.
UNHCR data shows Australia received 16,000 asylum claims in 2012, which is a small proportion of the 469,000 applications worldwide.
Rudd said he had spoken to UN Secretary-General Ban Ki-Moon, and would convene a meeting of transit and settlement countries to review global refugee arrangements.