Prime Minister Tony Abbott announced the mobilisation and deployment from Darwin, where he is about to tour Arnhem Land. It followed another beheading, this time of an English aid worker, by Islamic State militants.

The troops include 400 air-related personnel to support the deployment of the fighter jets. An Early Warning and Control aircraft and an aerial refuelling aircraft will also be sent from  Amberley airbase in the next week.

Another 200 other military personnel, expected to be mainly from the elite Special Air Services (SAS) based in Perth, will leave sooner. The Prime Minister said the special forces personnel will go into Iraq as military advisers to the Iraqi Army and the Kurdish Peshmerga forces.

"We think this is a balanced and proportionate contribution to what is our fight but it is the world's fight [too]," Mr Abbott said.

"Australia is prepared to engage in these operations because of the threat that this murderous death cult poses ... because it has  ambitions beyond any other group to arise so far."

"It is neither Islamic or a state," he said.

A final decision to send the troops into combat is yet to be taken but the deployment marks a major escalation of Australia's involvement. Mr Abbott said the Australian forces would operate only in Iraq, where the legalities are clear because the elected Iraqi government has invited in the multinational force. At this point, there was no plan to fight in Syria, he said.

The Prime MInister said he had received a request from the US in the past 24 hours and that the move to deploy troops had been discussed by the security subcommittee of cabinet and by full cabinet. He said it had the full support of the Opposition Leader, Bill Shorten.

Australia has already committed C130 Hercules transport aircraft and a C17 to the multinational effort including the US, Britain, Canada, France, Italy, Saudi Arabia and Egypt.

The Australians have been transporting weapons and munitions to Erbil, less than 100 kilometres from Mosul, the Islamic State stronghold.  

Last week US President Barack Obama declared a new counterterrorism campaign by "friends and allies" against the Islamic State militia but vowed it would be different from the costly wars in Iraq and Afghanistan initiated by his predecessor George W. Bush.

The President emphasised US ground troops would not return to a war-torn Iraq. Instead the US-led coalition – which includes Australia – would rely on a mix of more aggressive airstrikes, supporting local forces on the ground, counterterrorism measures and providing humanitarian assistance to innocent civilians displaced by the terrorist group.

Mr Abbott said Australians should prepared for a long fight of weeks or even months.