Canberra-based company Xtek will acquire the Wasp AE with companies like Melbourne-based Sentient and Canberra-based Mediaware tipped to provide the modified Australian content.

The SUAS capability will be acquired in two tranches, with the $101 million funding supporting the first tranche, something Minister for Defence Marise Payne said is to meet an immediate capability need.

Minister Payne said the systems were small enough to be carried, assembled and used by one person, and allowed the soldier to "see over the hill, around the corner and down the road".

"Similar systems, including the Skylark, have been used by our soldiers in Afghanistan and Iraq with tremendous success," Minister Payne said.

"They provide our military with a faster and better understanding of the battlefield than our adversaries."

The second tranche will upgrade the Wasp AE or acquire a replacement system within the next decade.

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Minister for Defence Industry Christopher Pyne said the proven capability is world-renowned and Defence will be working closely with the Centre for Defence Industry Capability to ensure strong Australian industry involvement.

"It’s a proven capability used by militaries around the world, including with the US Marine Corps," Minister Pyne said.

"Defence will work closely with Australian industry through the Centre for Defence Industry Capability to maximise opportunities for local companies to get involved in this important project."

Local industry content is valued at approximately $11 million for acquisition, plus up to $4 million each year for sustainment.