The University of Melbourne came in at number 14 while the University of Sydney and University of New South Wales tied for the 19th spot.
It's the first time the Quacquarelli Symonds World University Rankings has placed a greater emphasis on employment outcomes, sustainability and international research connections instead of student-to-teacher ratios and other factors.
University of Melbourne Vice-Chancellor Duncan Maskell said the results showed Australian institutions are among the best in the world.
"It is an unprecedented level of recognition that underlines the significant contribution that universities make to the nation's global reputation," Mr Maskell said on Wednesday.
His university climbed 19 spots and remains the highest-placed Australian institution in three major global ranking systems.
But the fact that two Sydney-based institutions secured spots in the top twenty reaffirmed the city's reputation as a global city for higher education, University of Sydney Vice-Chancellor and President Professor Mark Scott said.
"We know our research is world-class and the education our students receive at universities across Australia is amongst the best in the world and this outcome is a testament to that," he said.
University of NSW Sydney Vice-Chancellor and President Attila Brungs believes Australia's strong performance means the universities will be able to attract the world's best researchers, educators and students.
Other local institutions - including Australian National University, Monash University, University of Queensland, University of Western Australia, University of Adelaide and the University of Technology Sydney - made it into the top 100.
Massachusetts Institute of Technology, better known as MIT, took out the top spot followed by the universities of Cambridge, Oxford and Harvard.
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