Under the scheme, which passed the Senate on Tuesday, businesses and philanthropists would be able to come forward and invest in projects to protect the environment.
Projects could include removing invasive species or repairing damage to river beds or replanting habitats of threatened species.
The Greens agreed to support the nature repair market in exchange for the government updating its water trigger for new gas developments, meaning all projects would need to be assessed for its impact on water resources.
The nature repair market will be overseen by the Clean Energy Regulator, as well as being monitored by the federal government.
Environment Minister Tanya Plibersek said the scheme would help to protect crucial areas without greenwashing.
Environment Minister Tanya Plibersek says a nature repair scheme will help protect crucial habitats. (Mick Tsikas/AAP PHOTOS)
"If you're a farmer and you've got a remnant rainforest on your land, you can get paid for keeping feral species and the weeds out of it," she told ABC Radio on Wednesday.
"We are really excited about this as an opportunity to bring additional investment into nature across Australia."
Traditional land owners can also be paid as part of the nature repair market for work such as cultural burning.
Ms Plibersek said funding for projects would only be provided for approved methods.
"We'll set up methodologies guided by ecologists and scientists ... the methodologies will be publicly available," she said.
But opposition environment spokesman Jonno Duniam said the nature repair market would impose limits on landholders.
"This is going to place further restrictions on land users, people that we depend on for economic activity, farmers who grow the food that we eat, and miners who mine the minerals that we need to keep our manufacturing sectors going," he said.
"(Farmers) are not the ones who are going to be benefiting from this, it's going to be your big miners and big gas companies who would benefit from such a proposal."
Greens leader Adam Bandt said the party had secured a significant win on the water trigger.
"There's been a blow against new gas and oil projects. Previously you could frack areas ... and the government didn't even have to consider whether that was going to affect our previous water supplies," he told ABC TV.
"As a result of changes secured by the Greens, the government has to look at the impact on water before they approve or look at fracking. That means they can stop some of these projects."
Australian Conservation Foundation chief executive Kelly O'Shanassy welcomed the water trigger changes.
However, she said more work was needed on environmental law reform.
"At best offsets are ineffective at protecting the diversity of nature in Australia, at worst they facilitate the destruction of irreplaceable habitat," she said.
"The government will need to collaborate across the parliament to strengthen Australia's weak national environment law and stem the extinction crisis."
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