Australian Prime Minister Kevin Rudd has warned that all refugees who arrive in the country by boat will be resettled on the island nation of Papua New Guinea as his government struggles to stem an influx of asylum seekers.
The new policy was immediately condemned by human rights groups.
Mr Rudd and Papua New Guinea Prime Minister Peter O'Neill signed an agreement in the east coast city of Brisbane that will enable Australia to deport refugees to its developing neighbour in the south-western Pacific Ocean.
"From now on, any asylum seeker who arrives in Australia by boat will have no chance of being settled in Australia as refugees," Mr Rudd said.
The move, described by Mr Rudd as "very hard line", aims to deter an escalating number of asylum seekers who travel to Australia in rickety fishing boats from poor, war-torn homelands through other countries such as Indonesia and Malaysia.
The growing influx is a major political problem for Mr Rudd's party, which is the clear underdog in elections expected within months.
The policy was condemned by refugee and human rights advocates.
"The new plans to resettle all asylum seekers that are found to be refugees in PNG shows not only a complete disregard for asylum seekers but absolute contempt for legal and moral obligations," said Graeme McGregor, Amnesty International's refugee campaign co-ordinator for Australia.
David Manne, executive director of Australia's Refugee and Immigration Legal Centre, described it as "a fundamental repudiation of our commitment to protecting refugees".
Mr Manne described Papua New Guinea as an unsafe country where violence is widespread and serious human rights abuses are a daily occurrence.
But Mr Rudd said the policy met Australia's obligations under the United Nations' Refugee Convention. Papua New Guinea is a signatory of the same convention that sets out refugees' rights.
The rules will apply to asylum seekers who arrive from Friday.
Asylum seekers who arrive by boat would continue to have their refugee claims assessed in Australia and at detention camps in Papua New Guinea and Nauru.
Those who are found not to be genuine refugees could return to their home countries or another country other than Australia.
Australia would 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.
By Friday, 15,728 asylum seekers had arrived by boat this year. The arrivals are on track to exceed last year's total of 17,202 as well as the government's target of resettling 20,000 refugees a year.
Iran has become the biggest source country. Asylum seekers from Iran last year accounted for one in seven arrivals. This year, they make up one in three.
Indonesia has announced it will stop issuing visas on arrival to Iranians in a bid to stem the flow to Australia.
Mr O'Neill set no limit on how many asylum seekers his country was prepared to accept.
"It is not going to be easy, but of course Papua New Guinea is blessed with a large land mass and a very small population so there is enough assistance that we can give to the Australian government," he said.