Federal Agriculture Minister Murray Watt said the legislation would be enacted in this term of parliament, delivering one of Labor's election commitments.
Senator Watt also confirmed a $107 million transition package, saying it would give certainty to a "declining" industry.
The minister made the announcement on May 11 in Western Australia, where almost all live sheep exports begin their journey.
"There are a number of other states in Australia that used to do live exports of sheep," Senator Watt said.
"They got out of it — they moved into more onshore processing
Farmers and industry groups are furious, describing the support package as "pitiful".
"We’ll keep fighting,” National Farmers' Federation boss Tony Mahar said.
West Australian farmer Ellen Walker said the announcement was a "punch in the guts" off the back of a dry summer and weak prices.
“I currently have over 200 sheep that I am going to have to destroy because there is nowhere for them to go," she said.
The decision was also criticised from within Labor, with WA Agriculture Minister Jackie Jarvis again declaring her opposition and claiming the support package was inadequate.
"We believe current animal welfare measures including the northern summer live export ban are sufficient," she said.
The federal Opposition said it would reinstate the trade if it won the next election.
"Industry has never had the science explained to them why they are closing the industry down," Nationals leader David Littleproud said.
Labor pledged at the previous two elections to end the live sheep export trade after 2400 sheep died of heat stress in 2017 while travelling on a ship from Australia to the Middle East.
Australia has historically supplied a large volume of live sheep to the Middle East, although exports peaked in the early 2000s.
The RSPCA has welcomed the announcement.
"A swift and orderly phase-out of live sheep export, with appropriate measures to safeguard animal welfare in the meantime, is the right decision for Australian sheep and Australian farmers," RSPCA Australia boss Richard Mussell said.
Government figures show the industry has declined from $415 million to $77 million in the past two decades.
However, the industry has put the value of the live sheep export trade at an estimated $143 million a year.
More than half the $107 million transition package would be used to help sheep producers and members of the supply chain build on existing and emerging opportunities.
Funds would also be spent on a transition advocate to help with communication between industry and the government.
The timing of the ban on live sheep exports by sea was one of 28 recommendations from an independent panel that provided a detailed report to the federal government on the phase-out.
"The time needed to plan, make operational changes, increase sheep processing capacity and ensure markets are in place, without prolonging uncertainty, is best achieved by ending the trade at the beginning of the Northern Hemisphere Summer Prohibition in 2028," the report said.
The report, released on May 11, was delivered to the government in October.
A total of 23 of the 28 recommendations have been accepted, although the federal government is facing pushback.
"Industry will be continuing to fight this and the live export industry will be standing beside Western Australian producers all the way," Mark Harvey-Sutton from the Australian Livestock Exporters' Council said.
"Industry has collectively argued against the government to say that this trade should not be phased out — it is reformed.
"This policy is not based on evidence — it's based on activism."
Live-export ship the MV Bahijah was ordered to abandon its voyage in January due to Houthi rebel attacks in the Red Sea.
About 15,000 animals spent more than five weeks onboard the vessel before being forced back to Perth but were later cleared for re-export.
Senator Watt repeated his government's commitment that the ban would not extend to other industries such as cattle as some exporters feared.
5°C