U.S. troops in Darwin, only 820 kms (500 miles) from Indonesia, would be able to react quickly to any humanitarian and security issues in Southeast Asia, eliminating days of sailing from U.S. bases in north Asia or the Pacific.
The move, scheduled to be unveiled during the two day visit, may be seen by Beijing as further evidence of Washington's attempt to encircle China, with U.S. bases in Japan and Korea and now troops in Australia.
"The Chinese have gotten used to the fact that Australia and the United States have a very close military relationship. They expect nothing different," said former Australian defense minister Kim Beazley who met Obama when he landed in Canberra.
Obama was met by Prime Minister Julia Gillard after stepping off Airforce One and greeted with a 21 gun salute when he arrived at Parliament buildings in the Australian capital.
Some Asian nations are expected to welcome the U.S. military move in Australia as a counterbalance to China's growing power, especially its expanding maritime operations, and a reassurance that Washington will not scale back its engagement in the region due to a stretched U.S. military budget.
"We hope that bilateral cooperation between the countries concerned will be of benefit to the peace, stability and development of the Asia-Pacific region," said Chinese Foreign Ministry spokesman Hong Lei.
The winding down of wars in Afghanistan and Iraq has opened the door to greater U.S. attention to simmering tension over the South China Sea, a shipping lane for more than $5 trillion in annual trade that the United States wants to keep open.
Obama plans to raise maritime security in the South China Sea at a regional summit on Bali this week, defying China's desire to keep this sensitive topic off the agenda.
China claims the entire maritime region, a vital commercial shipping route rich in oil, minerals and fishery resources.
But Vietnam, the Philippines, Taiwan, Malaysia and Brunei hold rivals claims to at least parts of the sea and tension occasionally flares up into maritime stand-offs.
Obama will make an "anchor speech" outlining the U.S. vision for the Asia-Pacific to the Australian parliament on Thursday before a whistle stop in Darwin before flying to the Indonesian island of Bali for the East Asia summit.
Darwin, nicknamed the "Pearl Harbour of Australia" after a World War Two Japanese raid dropped more bombs on the city than those on Pearl Harbour, will give the U.S. military open access to East Asia sea lanes and the Indian Ocean.
Australia says hosting U.S. troops and the pre-positioning of U.S. supplies in Darwin is not the precursor to a U.S. base, but analysts say rotating more than 2,000 U.S. Marines in and out of the northern port city, and more frequent U.S. naval visits, will give Washington a de facto base.