Over the past nine years Canberra has provided hundreds of millions of dollars for Nauru to detain people trying to reach Australia by boat.
Last week both governments signed a new memorandum of understanding to extend this what they call "an enduring regional processing capability in Nauru."
Canberra is standing by its controversial policy to turn back boats arriving illegaly or to transfer people to Nauru for the processing of their asylum claims.
But regardless of the merit of those claims Australia remains adamant it will not allow any of these people to settle in Australia.
The Nauru President, Lionel Aingamea said this agreement "takes the regional processing to a new milestone.
A second processing facility on Manus Island in Papua New Guinea has been closed after the PNG courts ruled offshore detention was illegal.
The last of the inmates are either in Port Moresby or the Australian mainland.
The site on Manus is being eyed by Australia as a naval port.