The maritime exercises, to be held in the Bay of Bengal off India's eastern coast next month, will include anti-submarine warfare and coordinated anti-submarine drills, the Australian High Commission in Delhi said in a statement.
The Indian Ocean is fast emerging as a new arena of competition between China and India as New Delhi tries to regain its position as the dominant maritime power in what it views as its backyard.
China shocked India last year with two submarine visits to Sri Lanka's commercial port in Colombo. The island nation's general election this month returned a government friendly to India and the West, cementing a shift that followed the election of a new president in January.
David Brewster, a security expert at the Australian National University, said the Chinese submarine activity had served as a "wake-up call" that India needed to work more closely with other navies.
"We are seeing right across Asia many countries realising the importance of submarines," he told Reuters.
"India knows that it needs to build up its capacity in submarines and particularly anti-submarine warfare. It's an area where both (India and Australia) can learn a lot from each other."
India is also set to take part in joint naval exercises with Japan and the United States in October, the first such event in eight years.
Australia said it would send a frigate, tanker, submarine and a Lockheed AP-3C maritime surveillance aircraft to join the Indian navy for the bilateral exercises in September.
An Indian Navy spokesman said four of its ships, as well as a Boeing P-8 Poseidon spy plane, would take part in the week-long drills that start on Sept. 12.