Scientists will use the tests as part of efforts to identify the fallen soldiers, killed in the Battle of Fromelles of July 1916.
They were approved after a pilot study assessing the quality and quantity of DNA from a cross-section of teeth and bone samples.
Defence Personnel Minister Greg Combet, in a joint statement with his British counterpart, said the discovery of viable DNA had given the green light for full testing.
"The delicate condition of the remains, the soil surrounding them and high water table have made the experts' job extremely difficult," Mr Combet said.
"Every one of these men will be given a dignified burial with full military honours."
The burial pits were confirmed in excavation work in May last year and are believed to contain the remains of between 250 and 300 Australian and British soldiers.
An estimated 5533 Australian soldiers were killed, wounded or went missing in just over 24 hours during the Battle of Fromelles.
British Veterans Minister Kevan Jones said: "This is an important step forward in the process of trying to identify the soldiers buried at Fromelles."
Source: heraldsun.com.au