Canberra - Australia says it will increase its intake of refugees to 20,000 a year, from the current 13,750, in line with recommendations by an expert panel.
The Australian Prime Minister Julia Gillard said the jump of 45% was the biggest increase in 30 years.
Lawmakers also recently approved the re-opening of offshore processing camps for asylum seekers in Nauru and PNG.
The moves are aimed at deterring asylum seekers from making the dangerous journey to Australia by boat, amid an increasing number of arrivals.
The increase in Australia's humanitarian intake and the re-establishment of offshore centres were among 22 proposals put forward by an independent panel on asylum earlier this month.
The panel's review was commissioned by the Prime Minister amid government deadlock on the issue.
The three-strong panel, led by former defence chief Angus Houston, said its recommendations were aimed at encouraging people to seek asylum through official channels.
Ms Gillard said the move to increase refugee numbers sent a clear signal.
''Message number one, if you get on a boat, you are at risk of being transferred to Nauru or PNG. But message number two, if you stay where you are then there are more resettlement places available in Australia," she said.
The increase was "targeted to those in most need: those vulnerable people offshore, not those getting on boats'', she said.
''People who arrive by boat will get no advantage. It's not worth the risk to life and it's not worth the money, because there is absolutely no benefit to getting on that people-smuggler's boat.''
Asylum seekers often target Christmas Island, off Australia's northwest coast, to get to the country. They make the dangerous journey in boats that are usually overloaded and poorly maintained.
In June, a boat with 200 asylum seekers sank near the island - 17 bodies were found and another 70 were feared dead after a three-day search. That was the second boat to sink in a week, reigniting the debate on asylum in parliament.
As an indication of the government's commitment to ''safe alternatives to dangerous boat journeys'', Australia will proceed to immediately resettle an additional 400 refugees from Indonesia, Ms Gillard added.
The Australian government will also consult the UNHCR over the allocation of the remaining resettlement places.
More Afghans, as well as Syrians and Iraqis who had fled to refugee camps in Jordan, Turkey, and Lebanon, would be accepted as part of the increased intake, said Immigration Minister Chris Bowen. Nauru will be able to take in 500 asylum seekers by the end September, said Mr Bowen.
"Of course Sri Lankan refugees will continue to figure in our programme, as will Burmese in Malaysia, Thailand and India,'' he told reporters.
Ms Gillard has said she hopes that the offshore processing centres could be re-opened within a month.
The government has committed A$10m ($10.5m, £6.6m) for the centres, according to Australian media reports.
Australia’s government, meanwhile, is suffering in public opinion polls because of asylum seekers who are being smuggled from transit points in Malaysia and Indonesia by boat.

The numbers are small by international standards but they’re growing, to the chagrin of many Australians who prize their relative isolation as a country that borders nothing but ocean. Refugees are targeted in complaints of overcrowding and inadequate infrastructure in Australia’s largest cities.

Australia is negotiating with impoverished Papua New Guinea to open an immigration detention camp there but has rejected an offer to host asylum seekers from its South Pacific neighbor, the Solomon Islands, which teeters on becoming a failed state.

Malaysia’s neighbour Thailand, which is also criticized for its treatment of Myanmar refugees, is paying close attention to the Australian deal.
Australian Prime Minister Julia Gillard’s Labour Party had been critical of sending asylum seekers to camps in other countries when the previous conservative government, led by Prime Minister John Howard, did it. On being elected in 2007, the Labour government shut down camps that they condemned as inhumane in Papua New Guinea and the tiny Pacific atoll of Nauru.

Australia asylum
•    In 2010, there were 6,535 Irregular Maritime Arrivals (IMAs - people coming by sea) in 134 vessels
•    In 2011, 4,565 IMAs arrived in 69 vessels
•    As of 13 August 2012, 7,629 IMAs had arrived in 114 boats
•    To date, July has been the busiest month, with 1,798 IMAs
•    Most of the IMAs from 2009-2011 came from Afghanistan, Sri Lanka and Iran
•    Some asylum-seekers arrive by plane. Between July 2010 and June 2011, 6,316 people applied in this way
Source: Australian Department of Immigration and Citizenship