By Agence France-Presse
Huawei -- one of the world's largest telecommunications equipment and services providers -- has been under scrutiny in some countries including the United States and Australia over its alleged close links to Beijing.
Huawei was blocked from bidding for contracts on Australia's ambitious national broadband project in 2012, reportedly due to concerns about cyber-security.
The company has long disputed claims of any links to the Chinese government.
The federal government said in a statement that the "involvement of vendors who are likely to be subject to extrajudicial directions from a foreign government that conflict with Australian law" posed a security risk.
Acting Home Affairs Minister Scott Morrison and Communications Minister Mitch Fifield added that there was "no combination of technical security controls that sufficiently mitigate the risks".
Huawei Australia tweeted that the decision was an "extremely disappointing result for consumers".
"Huawei is a world leader in 5G. Has safely & securely delivered wireless technology in Aust for close to 15 yrs."
The move came amid tensions between Beijing and Canberra that has seen Australia refocus its foreign aid programmes to win hearts and minds in Pacific nations.
Beijing has been flexing its muscles in the Pacific and extending loans to the impoverished nations, with Australia raising fears some might get trapped with unsustainable debts, handing China influence.
Canberra in June said it would negotiate a security treaty with Vanuatu and also fund and build an underseas communications cable to the Solomon Islands and Papua New Guinea.
The Solomons arrangement came after the Pacific nation was convinced to drop a contract with Huawei.