Acting Prime Minister Richard Marles said Australia's concerns are addressed by the 20-point peace plan offered by the White House, which includes an immediate ceasefire, the release of hostages and prisoners on both sides and an end to Israel's military campaign in Gaza.
"I do think the plan represents hope," he told ABC Radio on Tuesday.
"We have been calling for a long time for a ceasefire, for the return of hostages, for a flow of humanitarian assistance into Gaza because of the humanitarian catastrophe which is unfolding there.
"This plan certainly embraces all of that. In that sense, we would very much hope that all parties ultimately do come on board with this plan, because I think the world wants to see an end to these hostilities."
Mr Marles said the healing and repair process needed to begin.
"We obviously have been extremely critical of Hamas and their conduct throughout, we have been critical of Israel, but at the end day what we need to see here is an end to the hostilities and this human tragedy being brought to an end," he said.
The peace plan also includes conditions previously rejected by both sides, and is dependent on Hamas' agreement - a point that concerns Liberal senator Dave Sharma, who is a former Australian ambassador to Israel.
He says getting Hamas to agree to a peace deal is plausible, but will be a challenge.
"Hamas is being asked to sign its own extinction warrant here," Senator Sharma told Nine's Today show on Tuesday.
"But the leaders are being offered amnesty and a safe passage out of it - exile if you like.
"They've lost a lot of their senior military leadership, so it might be an attractive offer to some of them to take."
Senator Sharma also said there could be other sticking points for Hamas, which Australia has listed as a terrorist organisation.
Hamas has previously demanded Israel withdraw entirely from Gaza before it released hostages.
If enacted, the US-led peace plan would establish a temporary Palestinian governing body supervised by a "board of peace" headed by President Donald Trump.
"This is a big, big day, a beautiful day," Mr Trump told reporters in Washington alongside Israeli Prime Minister Benjamin Netanyahu.
Mr Netanyahu said the US plan achieved his country's war aims.
"I support your plan to end the war in Gaza," he told Mr Trump, describing him as the "greatest friend that Israel" has ever had in the White House.
If Hamas doesn't agree, Mr Trump said Israel would have his full backing "to finish the job of destroying the threat of Hamas".
The plan also includes measures to encourage Palestinians to stay in the area and a surge in aid deliveries to Gaza.
The plan's announcement comes days after Australia joined a clutch of nations to recognise a Palestinian state, amid growing international pressure on Israel to end what a UN inquiry commission has ruled as genocide in Gaza.
Almost 160 members of the 193-strong UN recognise Palestinian statehood, but Mr Trump was vocal against the recognition.
More than 65,000 people have been killed in Israel's nearly two-year assault on Gaza, according to the local health ministry, after Hamas attacked Israel and killed 1200 people and took a further 250 hostage, according to Israeli tallies.
A majority of the dead in Gaza are civilians, including an estimated 18,000 children.
Israel rejects any accusations of genocide and denies starvation in the strip as deaths attributed to malnutrition and hunger-related deaths number in the hundreds, according to the Gaza health ministry and the UN.
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