The aerospace firm will upgrade the aircraft's airborne early warning and control capability.

The upgrade, which is likely to be completed by mid-2022, is expected to create 165 highly skilled jobs across Australia.

Minister Pyne said the jobs will be spread across the Boeing Defence Australia offices, with 120 jobs in Brisbane and 45 between the RAAF bases at Amberley and Williamtown.

"Majority of staff will be based in Brisbane with some staff at Amberley and Williamtown," Minister Pyne said.

"The Wedgetail is a modified Boeing 737-700, with the addition of advanced multi-role electronically scanned array (MESA) radar and 10 mission crew consoles. It is one of the most advanced pieces of aerospace technology in the Australian Defence Force."

Minister Payne said the aircraft will be upgraded with new and more advanced combat identification sensors, tactical data links and communication and encryption systems.

"The upgrades are an important step in maintaining a potent Australia air combat force and will ensure continued interoperability with Australian allies, including the United States and North Atlantic Treaty Organisation members," she said.

The Boeing-designed aircraft has been used extensively in Operation OKRA to combat Islamic State in the Middle East.

It has also participated in Exercise Bersama Lima, Exercise Cope North, Exercise Red Flag and Exercise Pitch Black.

"The Wedgetail has achieved outstanding results, completing over 350 missions and flying more than 4,400 hours with our coalition partners on Operation OKRA," Minister Pyne said.