Defence Minister David Johnston announced on Friday that the Australian Navy will begin looking for the HMAS AE1 in September.
The British-built submarine was Australia's first and fought in World War I.
It disappeared in waters near Papua New Guinea in 1914, with the loss of 32 sailors and three officers.
"I'm optimistic, I don't want to build anybody's hopes up, but I think this is good," Mr Johnston said at the Sydney launch of 100 years of submarine history.
"So bear with us, I'm hoping we will have some success."
A Huon-class coastal mine hunter will be used to search for the missing vessel.
The minister said the search could help solve the mystery of what happened to the submarine and provide closure to everyone affected.
The loss was the Royal Australian Navy's first major tragedy.
"This is important to them, I can tell, and I'm very pleased we're undertaking that," Mr Johnston said.