Under the terms of the deal, South Korean defence company Hanwha Corp (000880.KS) will build 30 self-propelled howitzers and 15 armoured ammunition resupply vehicles for Australia.
"It's an important further chapter in the defence industry story for Australia as we continue to build our sovereign capability and (South) Korea is an important partner in that journey," Australian Prime Minister Scott Morrison told reporters in Canberra.
The deal positions Hanwha as a frontrunner for Australia's planned A$30 billion contract to build infantry fighting vehicles for its army.
Shares in Hanwha were up 3% following the announcement.
While the defence deal is the headline of South Korean President Moon Jae-in's four-day trip to Australia, both countries said they have also agreed to work closely to help ensure supplies of Australian critical minerals exports for South Korea's tech sector.
Western allies have in recent months moved to reduce their dependency on China amid heightened concern about Beijing's control over the critical minerals sector.
South Korea needs critical mineral supplies, having pledged to become a global battery manufacturing powerhouse by 2030 as part of its plan to be carbon neutral by 2050.
Australia supplies around 40% of South Korea's critical mineral imports, which are crucial for many of the components needed to drive the world's economies to net zero emissions by 2050.