The technology will potentially be able to identify and automatically begin tracking a suspected terrorist or a wanted criminal in a crowd.
"I think it will play a key role in fighting crime and terrorism in terms of identifying potential threats," said Dr Terry Percival, head of the research team at the University of NSW.
"When the system is widely deployed in about five years time, it's possible it will be used to predict attacks and, possibly, help prevent them."
The Intelligent Video Analysis surveillance system (IVA) can "tag" suspicious behaviour and automatically alert authorities.
IVA can be programmed to identify specific events such as people leaving bags unattended, taking photos of critical infrastructure or climbing security fences.
It has the potential to dramatically cut the time it takes for police, private security and counter-terrorism teams to single out suspects in footage of crowded places such as train stations and airports.
It could also assist authorities in quickly determining the credibility of terrorist threats, such as bomb scares.
For example, if authorities suspect a bomb is planted at a train station, the technology can rapidly search through thousands of hours of footage to isolate each time a bag or object is left unattended.