The 11-page treaty was tabled to the Australian parliament late Tuesday -- offering Tuvalu residents the right to live in Australia if their homeland is lost to rising sea levels.
The pact also commits Australia to defending Tuvalu in the face of natural disasters, health pandemics and "military aggression", but only upon their request for aid.
The treaty was initially inked in November, but Australia needed to wait for the confirmation of the incoming Tuvalu prime minister before it could proceed.
Soon after taking office in February, Tuvalu's new Prime Minister Feleti Teo told AFP he had "no intention to revoke" the deal.
But he also expressed concerns about a provision giving Australia a say in what security pacts Tuvalu can sign with other countries.
That clause was seen as a significant strategic win for Australia as it fends off China's attempts to expand its security reach in the Pacific region.
However, it was criticised by Tuvalu's government as lacking transparency and potentially threatening "the integrity of the sovereignty of Tuvalu".
Tuvalu has now approved the final wording, which is unchanged, a source with knowledge of the negotiations told AFP.
Tuvalu, which has a population of 11,000, will now undertake its domestic consultation process to ratify and implement the treaty as soon as possible.
Australian Minister for International Development and the Pacific Pat Conroy said the treaty was one of the most significant agreements and "seeks to safeguard" the island's future.
Conroy added the treaty demonstrated that Australia was a "genuine and reliable partner" for Pacific nations.
"When we say we are part of the Pacific family, this is what we mean. We share a region, an ocean, and a future," he said.
Two of Tuvalu's nine coral islands have already largely disappeared under the waves, and climate scientists fear the entire archipelago will be uninhabitable within the next 80 years.
Already, sea levels on the island are nearly 15 centimetres (six inches) higher than 30 years ago, NASA data shows.
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