Eleven countries will be involved in the Talisman Sabre joint military exercises, held over two weeks.
New Zealand has sent two army platoons, 20 light armour vehicles and nine other vehicles, and three helicopters, as well as a Navy contingent.
Australia and the US began two weeks of war games involving more than 30,000 troops on Friday, in a show of force and unity at a time when China has emerged as an increasingly assertive power in the Indo-Pacific.
Held every two years, the first Talisman Sabre joint military exercises were conducted in 2005, and this year's drills will be the largest yet.
"The most important message that China can take from this exercise and anything that our allies and partners do together, is that we are extremely tied by the core values that exist amongst our many nations," US Secretary of the Navy Carlos Del Toro said during an opening ceremony on a naval vessel in Sydney.
The exercises, taking place in various locations across Australia, will include mock land and air combat, as well as amphibious landings.
The exercises demonstrated Australia's "commitment to working with our international partners to maintain the security and stability of our region," Defence Minister Richard Marles said at the same ceremony.
This year will see Germany participate for the first time, with 210 paratroopers and marines taking part as the European nation bolsters its presence in the Indo-Pacific.
Personnel from India, the Philippines, Singapore and Thailand will also attend as observers.
Australia is deepening security cooperation with the US and regional partners like Japan and India at the same time as the centre-left Labor government works to repair trade ties with China that have been strained by disputes over trade, investment and security.
A Chinese ship is currently off the east coast of Australia and is expected to shadow the exercises, according to an Australian defence official.
