They will practice survival skills in the Northern Territory in October during Exercise Kowari.
The second-in-command of the People's Liberation Army, General Fan Chanlong, met the Prime Minister, Defence and Foreign Affairs ministers and senior military officials in Canberra on Thursday.
Through a translator, Prime Minister Tony Abbott told General Chanlong the exercise was "good for the stability of our region and for our ongoing friendship and strategic partnership".
Exercise Kowari will involve 1st Brigade based in Darwin, US marines rotating through the Top End, and Chinese soldiers.
The pact is a major breakthrough for the Australian Government managing relations with the two countries.
China has previously expressed concern about the marines being stationed in Darwin.
"Australia's relations are getting stronger and stronger as part of our strategic partnership. We now have bilateral and trilateral and multilateral exercises involving Australia and China," Mr Abbott said.
"It was a real thrill to have Chinese aviators and Chinese ships working with Australia in the search for flight MH370 so you are a very welcome and honoured guest here in Australia."
General Chanlong said he had inspected some military facilities in Australia and enjoyed the Government's hospitality.
It is unclear how many Chinese will take part in Exercise Kowari but it is believed the contingent will be small.
Conditions in the Territory's outback during October will be harsh.
Known as the 'build up', the time of year is hot and humid before storms break late in the year.