Security agencies are concerned about the prospect of Australians joining Ukraine's military ranks amid the threat from Russian forces.
The concerns come as foreign ministers from the Quad prepare to meet in Melbourne on Friday to discuss tensions in the Ukraine among other issues.
ASIO director-general Mike Burgess told reporters in Canberra, after delivering his annual threat assessment, security agencies were "well versed in concern" about Australians seeking to go to foreign lands to fight.
"We and our partners in Home Affairs are watching that closely," he said when asked about Ukraine.
An estimated 4000 foreign fighters, including Australians, have joined Ukraine's militias and regular armed forces.
Numbers are expected to boom if Russia invades.
Foreign Minister Marise Payne said diplomacy remained the best way to address differences and to diffuse tensions, after a meeting with her Lithuanian counterpart Gabrielius Landsbergis in Canberra on Wednesday.
Mr Landsbergis said any action against Russia would need to be the strongest yet from Western nations with any incursion being its third such act of aggression following Georgia in 2008 and Crimea in 2014.
Senator Payne would not be drawn on what red lines needed to be crossed before any sanctions would be put in place.
"I'm not going to speculate on what red lines are - I would prefer to deal in the reality of events and I hope that they are not right.
"I hope that the diplomatic efforts which are being made by a number of leaders, in engaging with President Putin and the Russian administration, are able to persuade Russia that this is not a step that they should take."
Senator Payne is due to meet with US Secretary of State Anthony Blinken and foreign ministers from India and Japan in Melbourne on Friday.
It will be the first Australian visit from any cabinet-level official since Joe Biden became US president.
The meeting comes after China and Russia declared a "no limits" strategic partnership to build a new international order based on their own interpretations of human rights and democracy.
Senator Payne said the China-Russia arrangement was at odds with the global order sought by Australia and its allies and partners.
"We stand for openness, for the rule of law and ... the right of all countries - large and small - to pursue their own interests free of coercion."
