Greens leader and Foreign Affairs spokesman Dr Richard Di Natale said the arrest marked a dark day for press freedom globally.
Assange was arrested at the Ecuadorian embassy in London on Thursday night. He had been taking refuge there since June 2012 after having been granted asylum by Ecuador.
His arrest came after Quito withdrew his asylum and London Metropolitan Police were invited into the embassy to take him to jail.
“Seeking to punish Assange for exposing evidence of US atrocities in Iraq and Afghanistan would put a chilling effect on moves towards open and more transparent democracy."
The US issued an indictment just hours after Assange's arrest, claiming he had conspired with former US intelligence analyst Chelsea Manning to assist in cracking a password on US Department of Defence computers on a network meant for classified information.
Said Dr Di Natale: "This is not a simple case of someone breaking local laws while overseas. If extradited to the United States, Assange will be on trial for alleged crimes he committed while not even in the country.
"Foreign nations must not be able to extradite and charge journalists who have exposed their wrongdoing. It sets a terrible precedent and would be a disaster for the free press."
He said Australia should do more than make a tokenistic offer of consular assistance.
"I call on the Foreign Minister [Marise Payne] to make the most of our so-called special relationship with the United States to ensure that Assange is not extradited to the US.
“It’s time the ALP showed some courage and stood up for a more open and transparent democracy instead of again falling into line behind the Coalition.”