Australia said it would relax restrictions on defence cooperation with Burma, as the President Thein Sein the first visit of a Burmese head of State to Australia since 1974.
Prime Minister Julia Gillard said that increased involvement was in recognition of Burma's "key reforms".
Western Governments have welcomed greater political freedom in Burma.
However, campaigners had urged Australia to human rights issues with Thein Sein.
The two leaders met on Monday and has a joint press conference. Visit the Burmese president is expected to last until Wednesday.
While Australia's arms embargo would continue, would increase military engagement with Burma, and Australia send a defence attache and Trade Commissioner to the country, Ms Gillard said.
Australia would also be $ 20 m (£ 13 m) support for "strengthening democratic institutions, promoting human rights, improving the economic governance and to promote the rule of law", she added.
Thein Sein said he was proud of the first head of State to visit Australia in nearly four decades.
He also said that he hoped that the sheer scale of the reforms that Australia was Burma company would understand.
"This is not just a simple transition ... but a transition from military dictatorship to democracy," he said.
Burma installed a nominally civilian Government in March 2011, nearly half a century of military rule ends. Since then, the over a series of political and economic reforms.
The country is eager to revitalize the economy by renewal of the infrastructure and attracting foreign investment.
Activists, however, have warned that the reforms would stall, and that the problems of political prisoners and violence against ethnic minorities have yet to be resolved.
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