"Australians made great sacrifices in Korea," Gillard said in a ceremony commemorating the 60th anniversary of a fierce battle at Gapyeong, where a small force of Australia and other allies defeated an attack by a Chinese division.
The battle, Australia's largest military action during the war, helped stop the Chinese "spring offensive" and proved crucial in preventing a Chinese breakthrough towards Seoul, Gillard said.
"That night the defining fight for the Australians in the Korean War began... this battle that stopped a breakthrough," she said, stressing Australia proved itself as "a reliable and courageous ally."
More than 17,000 Australian troops served during the Korean War, with 340 Australians sacrificing their lives.
Of those, 281 remain buried at the UN Memorial Cemetery in the southern port of Busan.
"Our commitment to Korea was a sign of the future of Australia's security in the new post-war world," she said during the ceremony attended by scores of Australian veterans of the war," Gillard said.
On Monday, Gillard will attend the ANZAC Day Dawn Service - Australia's memorial day - at the National War Memorial in Seoul and hold a summit with South Korean President Lee Myung-Bak.
Gillard will leave for China on Monday, the last leg of her Asian trip, which began in Japan.