The award, from the Defense Materiel Organization, is worth about $23 million. The update will be physically installed on the first of six submarines in 2014 following trials at sea.
"The Collins class submarines have a very capable sonar suite but time has moved on and we are now leveraging advances in technology to deliver an important update that will treat obsolescence and result in substantial space, power and weight savings," said Thales Australia Chief Executive Officer Chris Jenkins.
"We have invested over many years and built a significant level of submarine sonar expertise in Australia, starting on the Collins in the 1980s and then leveraging this on other naval platforms.
"This is deep technical expertise of international standing. Having this capability in country enables us to provide these kinds of updates economically, quickly and at low risk," he said.
The upgrade will enhance the ships' Scylla sonar by replacing existing equipment in the Scylla Signal Processing Cabinets with modern commercial-off-the-shelf components and also re-hosting the software.
Upgrade work will mainly be performed at the company's underwater systems facility in Rydalmere, New South Wales.
Ohio crash that killed two caught on camera [VIDEO]
Wisconsin business offering 'therapeutic cuddling' forced to close