Yang Hengjun (53), a former Chinese diplomat turned online journalist and blogger, was detained in the southern city of Guangzhou in January this year and later moved to the capital Beijing.
"Dr Yang has been held in Beijing in harsh conditions without charge for more than seven months," Foreign Minister Marise Payne said in a statement on Tuesday, adding Yang was formally arrested on suspicion of spying last Friday.
Espionage is punishable by death in China.
There was no immediate response from China's Foreign Ministry. The Chinese embassy in Canberra was not immediately available for comment.
China has not allowed Yang access to his lawyers or family since his detention, Payne said. However, Australian embassy officials have visited Yang seven times since January, the government said.
Yang's Australian lawyer, Robert Stary, was not immediately available for comment.
Yang, whose legal name is Yang Jun, was detained in China while waiting for a transfer to Shanghai, after flying in from New York.
Feng Chongyi, an academic at the University of Technology in Sydney, said the allegations against his friend were very serious.
"It is absolutely outrageous they can provide no evidence for these politically motivated charges," Feng told Reuters.
The arrest of Yang comes as Beijing struggles to contain anti-government protests in Hong Kong, the semi-autonomous Chinese city.
"China has been looking to clamp down on democracy efforts. This is a clear message against those efforts," said Alex Joske, an analyst at the International Cyber Policy Centre, a think-tank.
Although Yang's recent writing has mostly avoided Chinese politics, he became prominent in the early 2000s when he earned the nickname "democracy peddler".
