Australia's next generation of submarines will be built in Adelaide in partnership with French company DCNS.
France's state-controlled naval contractor proposed a diesel-electric version of its 5000-tonne Barracuda nuclear-powered submarine. The $A50 billion ($NZ56 billion) contract would build 12 subs.
Australian Prime Minister Malcolm Turnbull told reporters today it was a "momentous national endeavour".
The recommendation of a competitive evaluation process and the experts who oversaw it, as well as the Department of Defence, was unequivocal.
The French offer represented the capabilities best able to meet Australia's unique needs, Mr Turnbull said.
"This is a great day for our navy, a great day for Australia's 21st century economy, a great day for the jobs of the future."
The project was expected to generate 2800 Australian jobs.
"The submarine project alone will see Australian workers building Australian submarines with Australian steel, here where we stand today," Mr Turnbull said.
Advanced manufacturing technology and skills were key to Australia's economic future, he said.
Defence Minister Marise Payne said the submarines were necessary for Australia's national security.
"It reflects the fact that we are a maritime-based trading nation and both our national and economic security are linked to the maritime environment of our region," she said.
Mr Turnbull thanked German firm ThyssenKrupp Marine Systems and the Japanese government for their "high quality" bids. He said the combat system would be sourced from the United States.
Senator Payne said the process had been robust, strong, methodical and rigorous.
Chief of Navy Vice Admiral Tim Barrett said the country needed 12 submarines which were "regionally superior".
"Navy will now work with industry, strongly, to make sure we deliver on that promise to government," he said.
Meanwhile, police are investigating how confidential information about the outcome of a tender process for the submarine fleet was leaked to the media.
It is the second leak from within the military acquisition project.
Australia's Federal Police confirmed in a statement to the ABC on Saturday that they had been asked to investigate, the broadcaster said. Police spokesmen were not available for comment.
The contract is politically sensitive as it will likely have an impact on thousands of jobs in the shipbuilding industry in South Australia state. Retaining votes in key electorates in that state will be critical for the government.
