The announcement comes a week before 130 world leaders meet in Rio de Janeiro to discuss sustainable development at one of the biggest conferences in United Nations history.
Australia's environment minister, Tony Burke, said on Thursday he wanted the reserves to set a global benchmark for environmental protection and ensuring food security. The reserves cover about a third of Australia's marine territory – an area as large as India.
"This is the biggest step forward the globe has ever seen," he said.
"We have an incredible opportunity to turn the tide on protection of the oceans and Australia can lead the world in marine protection. This new network of marine reserves will help ensure that Australia's diverse marine environment, and the life it supports, remain healthy, productive and resilient for future generations."
But the move drew an angry response from commercial and sports fishermen who claimed it would cost jobs and lead to price hikes. It was also severely criticised by environmentalists who said it did not place enough limits on offshore mining and provided the "bare minimum of protection".
The Australian Marine Alliance, which represents commercial and recreational fishermen, said the plan was "devastating" and would place a heavy burden on coastal communities.
Another group, the Gulf Commercial Fisherman's Association, said Australia had a plentiful supply of fish and would now have to rely on imported seafood.
"I can't understand it at all and I can't understand the general public wanting to eat imported fish over local fish," said Gary Ward, the group's chairman.
Responding to concerns about the impact on recreational fishing, the prime minister, Julia Gillard, told ABC Radio that "people will still be able to go and take their young son fishing." The Government has flagged a £65 million compensation package for commercial fishermen.
The Australian Marine Conservation Society said the reserves were a landmark achievement which would protect atolls in the Coral Sea from bottom trawling, oil and gas exploration and seabed mining.
"It's got a long chain of coral atolls which are very important for the corals themselves and also the fish and shark species that they support," said the group's director, Darren Kindleysides. "There is a gigantic weight of scientific evidence that shows that marine reserves work in terms of protecting wildlife but also in terms of benefits to biodiversity."
But the Greens party, which holds the balance of power in the upper house of Parliament, expressed reservations about the plan.
"The boundaries the minister has determined have been very strongly determined on oil and gas prospectivity, and clearly determined by lobbying from the oil and gas sector," said an MP, Rachel Siewert.
The Australian Conservation Foundation said the plan exposed marine life in the north west region to continued threats from oil and gas exploration.
The announcement today followed a scathing UN report last month which warned the Great Barrier Reef's heritage listing could be restated as "at risk" unless greater care was taken to protect the area, particularly from the gas and mining boom.