The move comes in a week when Prime Minister Malcolm Turnbull announced axing a temporary work visa popular with foreigners and replacing it with a tougher program in a bid to put "Australia First".
Australia has seen the rise of nationalist, anti-immigration politics with far-right wing parties such as One Nation garnering strong public support, while the popularity of Turnbull's ruling center-right government has been languishing.
The new citizenship requirements are expected to be passed by parliament with the backing of right-wing Senators.
On Thursday, Turnbull said basic English would no longer be sufficient to become an Australian citizen under the new test.
Applicants need a minimum level 6.0 equivalent of the International English Language Testing System, and a person will only become eligible for citizenship after four years as a permanent resident, up from one year.