Australia and Vanuatu have agreed to a 10-year deal, aimed at strengthening security and economic ties, worth A$500m ($328m; £241m).
The so-called Nakamal agreement - the result of months of negotiations - will transform Australia's relationship with its Pacific neighbour, leaders from both countries said on Wednesday.
"We are family," Australia's deputy prime minister Richard Marles said, adding, "Our future is very much bound together". Vanuatu's leader Jotham Napat described the deal as "win-win situation" for both nations.
The deal, to be officially signed in September, comes as Australia tries to grow its influence in the region, to counter China's increased spending and power.
While the Australian government did not provide further details of the deal, the Australian Broadcasting Corporation (ABC) reports it will provide funds to build two large data centres in the capital, Port Vila, and Vanuatu's largest island, Santo.
Millions will also be poured into helping the low-lying island to deal with the impacts of climate change, as well as building up its security.
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