The children's commissioner is expected to be in place by the end of this year, after the government determines who will fill the role.
The commissioner will promote issues affecting children, conduct research and education programs, consult with children and representative organisations and monitor related federal legislation.
"The Children's Commissioner will ensure the voices of children and young people are heard in the development of Commonwealth policies and programs," Attorney-General Nicola Roxon said in a statement on Sunday.
Families Australia said the new commissioner should initially focus on child abuse and the over-representation of Aboriginal and Torres Strait Islander children in child protection.