Teachers who choose to spend time in rural schools will have their student debt wiped in a bid to cover shortages.
But there are concerns the debt waiver alone won't be enough to fill hundreds of vacancies.
The federal government will clear HELP debt for those who stay four years in a "very remote location" at a primary or secondary school, day care centre or preschool.
Eligible teachers will have either the debt of their initial teaching degree waived or whatever debt remains when they start the position, whichever is less.
The incentive will initially be open to teachers who have been in remote locations since 2019, meaning they get a head start.
It is expected it will save teachers an average of $35,000, with up to 2000 of them likely be able to benefit immediately.
An additional 500 teachers would then become eligible each year.
About 300 remote schools will benefit in total.
Education Minister Jason Clare said on Thursday there was a serious teacher shortage across the nation and it was worse in rural communities.
"Your impact is bigger. Your chance to shape and change and improve the lives of people is bigger," he said of working in remote locations.
Communities with high Indigenous populations who are less likely to finish school and go to uni especially stand to gain.
"In a school like this, where 75 per cent of the kids are Indigenous, that really matters," Mr Clare said, announcing the policy in the outback NSW town of Menindee.
He said the scheme could be expanded if it works well.
The Regional Australia Institute said while the waiver was welcome, it needed to be balanced by properly addressing housing and liveability.
It said research had shown the social and wider economic circumstances of a regional place, and confidence in the working conditions on offer, are at least as important as salary in deciding where to work.
The RAI estimated there were over 1500 advertised vacancies for education professionals in regional Australia just in November 2022 - four times that advertised a decade ago.
The Australian Education Union welcomed the initiative, saying the government needed to find long-term solutions to address the crisis.
"This is a significant move to address teacher shortages and will encourage teachers across the country to move to areas where schools need them the most," union president Correna Haythorpe said.
Universities Australia also hailed the scheme, saying everyone deserved access to a good education.
"Encouraging more teachers to work in remote areas will ensure people living in those parts of our country can access the educational opportunities they deserve," acting chief executive Peter Chesworth said.
The places covered by the scheme are those defined as "very remote areas" by the Australian Bureau of Statistics, including large parts of Western Australia, the Northern Territory, South Australia, Queensland and northwestern NSW.
