Evidence shows reasonable grounds to believe three top Hamas commanders committed war crimes following its attack against Israel, according to International Criminal Court's chief prosecutor Karim Khan.
But he said there were also reasonable grounds to suspect Mr Netanyahu and Defence Minister Yoav Gallant bore responsibility for war crimes and crimes against humanity in retaliation against Hamas in Gaza.
They included starvation of civilians, wilfully causing great suffering, persecution and intentionally directing attacks against civilians.
Benjamin Netanyahu is accused of responsibility for war crimes. (AP PHOTO)
The Foreign Affairs department said it respected the ICC but "there is no equivalence between Israel and Hamas".
"Hamas is a terrorist organisation, it is proscribed as such in Australia … Australia has been clear and unequivocal in our condemnation of its terrorist actions," a DFAT spokesman said in a statement.
"Any country under attack by Hamas would defend itself. And in defending itself, every country is bound by the same fundamental rules. Israel must comply with international humanitarian law."
Prime Minister Anthony Albanese refused to comment but US President Joe Biden branded the warrant application "outrageous".
Germany said simultaneous applications for the two sets of warrants gave a "false impression of equivalence" between Hamas and Israel, an argument echoed by Jewish groups and the opposition in Australia.
But Australian Centre for International Justice executive Rawan Arraf welcomed the move and called on the government to condemn attacks attempting to undermine the ICC and "entrench impunity for Israeli leaders".
Ms Arraf further asserted the warrants put Australia on notice it might be assisting international crimes.
"All arms exports, including of parts and components to Israel, and all defence deals such as the one recently signed with Elbit Systems, must end and be rescinded," she said in a statement.
"We remind the Australian government it is duty bound to comply and execute any arrest warrants issued."
Alleged crimes by Hamas leaders include torture, cruel treatment, murder, rape and acts of sexual violence and taking hostages.
Jewish groups have criticised the ICC's actions. (Con Chronis/AAP PHOTOS)
Hamas attacked Israel on October 7, killing 1200 people and taking more than 200 hostages, according to Israel.
Israel's ground offensive and bombing campaign in Gaza has since killed 35,000 people and injured about 77,000, according to its health ministry.
Mr Albanese ducked questions on the warrants, stating he didn't want to comment on a court process where Australia is not a party.
The focus should be on a humanitarian ceasefire, aid and the release of hostages, he said, pointing to the need to progress a two-state solution.
Opposition Leader Peter Dutton chastised him for "tarnishing and damaging our international relationships with like-minded nations when he's not strong enough to stand up alongside President Biden".
"It's an abomination and it needs to be ceased. This action is anti-Semitic and it's against the interests of peace in the Middle East," he said.
The Greens backed the ICC and called on the government to support the chief prosecutor and expel Israel's ambassador to Australia.
Former ICC prosecutor Luis Moreno Ocampo said the court was treating both Israel and Hamas as suspects rather than equally, while the simultaneous charges were a mark of impartiality.
The warrants were welcomed by the Australian Federation of Islamic Councils and Australian Muslim Advocacy Network, which also called for sanctions.
That Israeli leaders were being targeted alongside leaders of a prescribed terrorist group was "legally misconceived and morally indefensible", Zionist Federation of Australia President Jeremy Leibler said.
