Eurovision said Australia's involvement was an "exciting step" towards making the contest "a truly global event".

Guy Sebastian last year performed as an Australian wildcard entry, to mark the show's 60th anniversary and came fifth with his song, Tonight Again.

In 2015, Australia had a guaranteed spot in the final, but Eurovision said in 2016 it would first have to compete in the semi-final stages.

"We strongly believe the Eurovision Song Contest has the potential to evolve organically into a truly global event," said Jon Ola Sand, the contest's executive supervisor.

"Australia's continued participation is an exciting step in that direction."

Australia is also going to debut at the Junior Eurovision Song Contest on 21 November in Sofia, Bulgaria.

The EBU Reference Group, the governing body of the Eurovision Song Contest, voted unanimously in favour of Australia's participation next year, but it has not yet been decided whether it would become a permanent participant.

"Europe and Australia have a lot in common in regards to cultural values," said EBU governor Frank Dieter Freiling. "The only right thing to do is to be inclusive.

"This is also a way for many Australians to re-connect with their European roots, and celebrate our shared cultural values and understanding through music."

If Australia win, the 2017 contest would be co-hosted by Australian broadcaster SBS and an EBU member based in Europe.

Last week, 2014 winner Austria's Conchita Wurst backed Australia's permanent inclusion.

"I'm by your side, definitely," she told the Australian Broadcasting Corp. "I think it's just necessary, basically."

The next Eurovision Song Contest will take place on 10, 12 and 14 May 2016, in Stockholm's Globe Arena.