The 40-year-old member of the Perth-based Special Air Service Regiment was shot in the chest while on a mission with Afghan forces hunting an insurgent commander in Uruzgan province Monday, the general said.

"This man was a soldier's soldier," he added.

The trooper -- who was on his seventh tour to Afghanistan in 11 years -- had been hit during a small arms firefight in the Chora valley and the mission was continuing, Hurley said.

The death was Australia's first since October and Hurley said it was "unusual" for one soldier to serve seven tours in the war-torn country.

"About this time last year, when I took over as the Chief of the Defence Force, I raised my concerns about frequency of tours (and) had that examined," he said.

"I'm confident that the management processes are in place in terms of the psychological management of members of the SAS. But it's an issue we need to keep a sharp eye on."

Australia, a close ally of the United States, has some 1,550 troops stationed in Afghanistan with a focus on training and mentoring Afghan National Army soldiers in Uruzgan.

Prime Minister Julia Gillard said the death was a "dreadful blow".

"I know Australians today will stop, will pause, will reflect and will mark with respect the loss of this brave soldier and will honour his service and his sacrifice," she said.

"We went there to make sure that Afghanistan would not continue to be a safe haven for terrorists," she told reporters in Darwin. "We will continue our mission in Afghanistan even as we grieve his loss."

Australia first sent troops to Afghanistan in 2001 but later pulled out, only to redeploy there in 2005.

Gillard said earlier this year that Australia would begin withdrawing its forces in 2013, quicker than planned due to significant security gains and as Canberra has faced increased pressure over the long-running campaign.

Foreign troops have been in Afghanistan since a US-led coalition toppled the Taliban regime in late 2001 for sheltering Osama bin Laden after the 9/11 attacks.