Prime Minister Anthony Albanese and his PNG counterpart James Marape met in Sydney on Thursday to shake hands over the deal, the culmination of two years of planning.
The pair reached an in-principle agreement with the NRL in May, and have since been ironing out specifics.
The final legal documents to ratify the team's creation are expected to be signed in the coming weeks.
"I am delighted to announce the Australian government is supporting a PNG team to join the NRL from 2028," Albanese said.
"Rugby league is PNG's national sport, and PNG deserves a national team. The new team will belong to the people of PNG and will call PNG home.
"I know it will have millions of proud fans barracking for it from day one. Not just in PNG, but I suspect many Australians will adopt the PNG team as theirs."
The as-yet-unnamed team is seen as key diplomatic tool for Australia to strengthen ties in the hotly-contested Pacific, and will cost the Australian taxpayer $600 million over 10 years.
It will be either the NRL's 18th or 19th franchise, pending further expansion plans into Perth.
Players will be granted tax incentives to relocate to PNG, and will live in a secure compound in Port Moresby to be organised and funded by the PNG Government.
Initial estimates suggest that players will therefore be able to pocket almost double the amount of money they would on the same salary in Australia.
The 10-year deal with the Australian government will commence now and run until the end of 2034.
With AAP.
