The federal government committed to 35 of 54 recommendations outlined in a report by Aftab Malik, the special envoy to combat Islamophobia.
Measures promoting social cohesion in eduction, including a review to strengthen religious and racial tolerance along with workplace training for politicians and public servants, are among a series of measures adopted by the government.
Still, Mr Malik's calls for an independent review of counter-terrorism laws, along with a commission of inquiry into Islamophobia, anti-Palestinian and anti-Arab racism, went unanswered, 10 months after the report was first handed to the government.
"Muslim Australians should not be expected to bear the cost of that complexity indefinitely. Where the government has acted, I will support that progress," he said on Saturday as the report was released.
"Where recommendations remain outstanding, I will continue to advocate for them."
Peak body advocates say the government's response is welcome, but believe more needs to be done, including practical enhancements that lead to lasting systemic change.
"This is an unprecedented and important step in the right direction towards recognising and addressing the serious impact of Islamophobia and anti-Muslim hate," the Alliance of Australian Muslims and the Australian National Imams Council said in a joint statement.
"Australian Muslims must be able to see and experience real improvements in their safety, protection, inclusion and ability to participate fully in Australian society without fear of discrimination or hostility."
Community members should not feel unsafe or unwelcome, with advocates urging that clear commitments, adequate resources, effective accountability can deliver lasting change.
The government has committed to establishing an education task force aimed at tackling Islamophobia in the community.
There will also be targeted funding to bolster the safety and security of Muslim institutions, which includes $41.9 million across initiatives to improve security at faith-based places.
The measures are set to build on extensive existing work across government to combat Islamophobia.
A focused review will also occur of the Australian Curriculum to identify opportunities to strengthen understanding of all forms of hatred, including Islamophobia.
Multicultural Affairs Minister Anne Aly on Saturday said the response was a milestone moment, adding it was the first government recognition that Islamophobia was an immediate threat to the community.
''It is dangerously close to becoming normalised, and that it has traumatising, detrimental, and long-lasting effects on a significant number of Australians,'' she said.
"Islamophobia is harmful and causes lasting damage to individuals, communities and to the social fabric of our country."
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