The large investment, aimed at boosting oil and gas and minerals exploration, will fund the Exploring for The Future (EFTF) program.
The program is managed by Geoscience Australia and provides geoscientific data on potential oil and gas deposits in frontier basins including the Beetaloo and greater McArthur Basins, both in the Northern Territory.
The data is then made freely available to industry, to encourage exploration and future discoveries.
In announcing the $125 million investment, which builds on an earlier $100 million commitment to Geoscience Australia, federal Minister for Resources and Northern Australia, Keith Pitt said the program would help the Australian economy recover following the COVID-19 pandemic and domestic recession.
"Our resources sector has been the standout performer over the last few months, continuing to operate safely during these unprecedented times," Pitt said.
"This program will help deliver the next round of investment and job creation in our world-leading resources sector.
The first phase of Exploring for the Future, focussed on northern Australia, commenced in 2016 and will conclude on 30 June 2020.
The additional funding provided by the federal government will extend the program for another four years and take a national approach.
Australia's peak body for the oil and gas sector, the Australian Petroleum Production Exploration Association, welcomed the funding and said it would have "broad community benefits."
"The challenging conditions facing the industry, both globally and in Australia, mean it is more important than ever to ensure the policy and regulatory framework facing the oil and gas industry in Australia remains competitive and encourages further exploration and development activity," APPEA chief Andrew McConville said.
"Capturing future growth and investment opportunities and leveraging investments to support future industry service sector growth, is rightly a key component in helping Australia recover from the economic impact of COVID-19."
According to Geoscience Australia, more than 80% of Australia remains unexplored.