Ten thousand Australian and American troops are gathering in Queensland for a large scale military training operation.
By Phil Mercer
BBC correspondent in Sydney
Exercise Crocodile will test the ability of forces from both countries to work together in a crisis.
The Australian defence force has said ships, fighter jets, submarines and elite special forces will be involved.
In a separate drill off the coast of north-eastern Australia, warships and surveillance aircraft from up to 11 nations will practise the interception of boats suspected of carrying illegal drugs, missiles and weapons of mass destruction.
Exercise Crocodile is a big test for Australia's defence force. It has taken two years to plan and is further evidence of Canberra's military commitment to Washington.
The focus of this simulated battle will be the Shoal Water Bay area north of Brisbane.
There the combined Australian and US task force will be deployed to win back a stretch of coastline captured by the enemy.
The first phase will be reconnaissance by Australian commandos before an amphibious assault by ground troops. There will be five days of live firing exercises.
Australia's ties with the United States have strengthened in recent years. It was the third military force in the US led campaign in Iraq. The conservative government of John Howard also sent soldiers to fight in Afghanistan.
The operation in the Coral Sea will practise intercepting suspect boats
Taking place at the same time as Exercise Crocodile will be manoeuvres in the Coral Sea off the Queensland coast.
They are aimed at combating the trade in chemical, biological and nuclear weapons. Members of the Proliferation Security Initiative, including the US, Britain, Japan and Australia, will practise the interception and boarding of suspect vessels.
The initiative was launched by President Bush in May, amid concerns that weapons of mass destruction and missile technology could be exported by rogue states, including North Korea, to terrorists.