The UN's chief nuclear inspector has warned of a "race against time" to stop a terrorist nuclear outrage.
Alexander Downer and Mohamed ElBaradei opened the conference
International Atomic Energy Agency head Mohamed ElBaradei said the threat was "real and current".
At the start of a two-day international summit in Australia on nuclear proliferation, he pointed to an extensive trade in radioactive materials.
Officials from the Asia-Pacific region are discussing how they can keep nuclear power out of terrorist hands.
Mr ElBaradei said the IAEA's investigations into Libya and Iran's suspected weapons programmes had revealed an extensive black market for radioactive materials.
There had been around 630 confirmed incidents of trafficking in nuclear or other radioactive materials since 1993, he said.
"We have a race against time because this was something we were not prepared for," he said.
"We need to do all we can to work on the new phenomenon called nuclear terrorism, which was sprung on us after 9/11 when we realised terrorists had become more sophisticated and had shown an interest in nuclear and radioactive material," he added.
Australian Foreign Minister Alexander Downer told delegates at the conference in Sydney that the problem was worldwide and no-one could be complacent.
"Proliferators and terrorists operate globally so any nuclear security weakness at the local or regional level risks being exploited," he said.
He said it was imperative for the world to take this emerging threat seriously.
He said the radical Islamic group Jemaah Islamiah, blamed for the Bali bombings two years ago, would not hesitate to use radiological weapons in its campaign of terror.
While it is considered highly unlikely the group could obtain or build a nuclear bomb, there is a fear about the potential use of crude radiation devices, says the BBC's Phil Mercer in Sydney.
Australia hopes the summit will increase cooperation with its neighbours in the Asia Pacific region, our correspondent says.
New Zealand has said it is important to ensure sensitive and radiological materials are properly managed to stop them falling into the wrong hands.
The conference is also expected to look at international efforts to address the nuclear aspirations of Iran and North Korea.