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New South Wales (NSW) state health officials said initial testing "strongly indicates" the traveller who arrived in Sydney last week before the latest border restrictions was infected with the Omicron variant of the coronavirus.
The fully vaccinated person visited a busy shopping centre in Sydney while likely infectious, officials say. All passengers in the person's flight were asked to self-isolate for 14 days regardless of their vaccination status.
If confirmed, the total number of cases infected with the new variant in Australia will rise to six. All other cases have been in quarantine and are asymptomatic or display very mild symptoms.
Authorities also said urgent genomic tests have begun to determine whether two other positive cases are infected with the Omicron variant.
The report about the new probable community case came as Australia's emergency cabinet - a group of federal and state leaders - met to review measures aimed at limiting the spread of the variant.
The country already delayed the reopening of its international borders by two weeks, less than 36 hours before international students and skilled migrants were to be allowed to re-enter the country.
NSW, home to a third of Australia's 25 million population, increased fines for overseas arrivals who didn't comply with a mandatory 72-hour self-isolation, to A$5,000 from A$1,000 for individuals and to A$10,000 from A$5,000 for corporations.
The state, which recently emerged from four months of lockdown, has been unwinding its system of mandatory hotel quarantine but has said arrivals from several southern African countries must still spend 14 days in quarantine.
But the federal government urged state leaders to go ahead with plans to relax domestic border restrictions, which have been in place sporadically since the start of the pandemic, by Christmas.
"We need to make calm decisions. Don't get spooked by this," Prime Minister Scott Morrison said at a news conference in Canberra.
Health Minister Greg Hunt said the overwhelming view of medical experts was that "while it's an emerging variant, it's a manageable variant".
Omicron, dubbed a "variant of concern" by the World Health Organization, is potentially more contagious than previous variants although there are signs it may be milder than initially feared.
Tough border restrictions and snap lockdowns have helped Australia keep its COVID-19 numbers relatively low, with around 210,000 cases and 2,006 deaths.