Prime Minister Anthony Albanese and state and territory leaders agreed people with COVID will no longer be subject to a five-day stay-at-home order, following Friday's meeting at Parliament House.
The changes will come into effect from October 14.
The isolation period, however, will still apply to employees in vulnerable settings such as hospital workers and those in aged care.
The decision to get rid of the mandatory isolation period will also mean the end of pandemic leave payments for affected workers, with the payments also ending from October 14.
Some state and territory leaders had urged ahead of national cabinet for an end to mandatory isolation periods.
However, the president of the Australian Medical Association Steve Robson earlier on Friday blasted leaders who had advocated for a scrapping of isolation measures.
"People who are pushing for the isolation periods to be cut are not scientifically literate and are putting the public at risk, and they need to understand that," he told the ABC.
"We're seeing a huge upswing in the numbers of COVID cases again. It's coming into holiday season when people would be travelling around the world.
"It's a period of significant risk and we're urging caution because we need to protect the health system."
Meanwhile defence force support for the country's aged care sector for COVID is coming to an end.
In a joint statement released by Defence Minister Richard Marles and Aged Care Minister Anika Wells, they confirmed the assistance will not be extended beyond Friday with the winter peak of the coronavirus over.
"We have left no stone unturned tackling the pandemic and supporting the aged care sector throughout this winter," Ms Wells said.
Mr Marles, who is also the deputy prime minister, said the ADF's resources had to be used for other priority areas.
The armed forces were brought in at the start of the pandemic as a surge workforce to help manage outbreaks in aged care homes.
WEEKLY VIRUS DATA BY JURISDICTION
* NSW: 12,592 new cases, 82 deaths
* Victoria: 9458 new cases, 59 deaths
* Queensland: 8061 new cases, 77 deaths
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