The $262 million contract for upgrading the ANZAC class ships follows the upgrade of HMAS Perth earlier this year.
BAE Systems Australia's director of Maritime operations, Harry Bradford, said project management and planning would begin immediately. Fabrication would begin next June.
The project includes integration of CEA Phased Array Radar, the Vampir NG Infrared Search and Track system, the Sharpeye Navigation Radar System and an upgraded Saab Combat Management System.
"The platform integration of these systems will require significant structural modifications," Bradford said. "However, having undertaken this already on HMAS Perth we will be able to implement process improvements gained from that project.
"Like the work carried out on HMAS Perth, we will again replace the forward and aft masts on all ships."
BAE Systems Australia said the contract will be completed through the ANZAC Ship Integrated Material Support Program Alliance comprising BAE Systems, Saab Systems and Australia's Defense Materiel Organization.
Work on the project will take place at the company's shipyard in Henderson, Western Australia, and is expected to be completed in 2017.