The two-day sit-down in Canberra later in March will cost $1 million and come out of the existing Department of Foreign Affairs and Trade budget.
"We will be cancelling other meetings that would be taking place so there will be no new money required," Foreign Minister Julie Bishop told reporters in Canberra on Wednesday.
It's the first time Australia will bring back all its heads of mission for one meeting.
They will provide input into the development of a new foreign policy blueprint, known as a white paper.
Such gatherings are an established fixture on the calendar of other nations.
"I think it's entirely appropriate for a nation of our size and our significance in security and economic terms globally, to carry out such an exercise," Ms Bishop said.
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Deputy Labor leader Tanya Plibersek disputed claims the most recent foreign policy blueprint was framed 14 years ago.
The Australia in the Asian Century white paper was released by the Gillard government in 2012 and focused on opportunities in the fastest growing region on earth, she said.
"This government came in and junked it ... something which was an extraordinary act of vandalism."
Ms Bishop told Fairfax Media: "At a time of significant global uncertainty, it is vital that Australia harness the experience and intellect of our most senior diplomats,"
"This meeting will be important in strengthening Australia's influence and standing in the world."
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Such meetings have become an established fixture on the calendar in other nations but Australia has traditionally flown staff to regional meeting points.
The last foreign policy white paper was published under John Howard in 2003.
