Conflict zones
He said at least 100 Australians were fighting with terror groups in the Middle East, and as many as half of them had dual citizenship.
Another 150 people in Australia were known to be supporting such groups, while Australia's intelligence agency, the Australian Security Intelligence Organisation (ASIO), was investigating about 400 high-priority terrorist cases.
"This could be the most serious national security challenge we face in our life time," Mr Abbott said.
Officials are worried about the effect on domestic security of people returning from conflict zones in the Middle East, as well as of those who support them and their activities.
Australia already has the power to confiscate the passports of people suspected of planning to go and fight overseas. About 100 passports have already been cancelled on national security grounds.
In recent months, there has been a series of raids in Australian cities of people suspected of being involved in terror activities.