The documents, released under Freedom of Information laws and obtained by Fairfax Media, have surfaced as more veterans detail trauma after taking the drug mefloquine, which they say scarred them with permanent psychological damage, anxiety, vertigo, nightmares, suicidal thoughts and hallucinations.

Fairfax Media has reported growing soldier fears about the drug over recent weeks, however these new heavily redacted records reveal those concerns have been held inside Defence since 2001.

Mefloquine remains the third choice anti-malarial for the ADF despite it being banned from prescription to US Special Forces in 2013 and the subject of an ongoing British House of Commons defence select committee hearing. It is also under investigation by the Inspector-General of the Australian Defence Force.

The drug has been used on up to 2000 Australian personnel since a controversial trial in East Timor in 2001-02.

Senior ranks have resisted banning the drug because it would prevent some deployment opportunities. The Department of Defence has insisted the drug is ethical as those who experience confusion, restlessness, depression or anxiety are urged to contact their medical officer immediately.

But Australian Defence Medical Ethics Committee documents, declassified by Defence on Wednesday, reveal the military was concerned as far back as 2001 about the safety of soldiers using the drug.

"The protocol caused considerable debate when it became apparent that mefloquine had potentially serious side effects of which the [committee] had been previously unaware," the document read.

"In particular, side effects of depression and psychosis caused considerable concern to committee, especially were they to occur in deployed troops."

About 580 ADF members were prescribed mefloquine between 2000 and 2005. Another 1319 were prescribed as part of studies by the Army Malaria Institute in 2001 and 2002.

About 25 ADF personnel are now treated with mefloquine each year because they are intolerant to other anti-malarial medication, according to the ADF.

"While in the majority of cases the side effects associated with mefloquine disappear after ceasing the medication, Defence accepts that some people do continue to experience ongoing issues," a spokesman said.

Heath Attard, who served with the fourth battalion in East Timor and was given mefloquine as part of the trial, said many soldiers stayed quiet about the side effects to avoid trouble.

"My impression was that I might get a rash or something if I was allergic like a penicillin allergy or similar. The reality was much more severe," he said.

"I had erratic behaviour, severe anxiety, memory lapses and severe mood swings. The platoon I was with was a mad house of emotions and there were constant arguments and irrational moments."

The declassified documents also raised concerns the risks of the drug and the clinical trials were not adequately explained to ADF members.

"It would be preferable to have all information conveyed openly and honestly to ever member involved in current and previous tafenoquine trials," the document said. "This will markedly reduce the risk of a perceived cover-up"

The Inspector-General's review was prompted by formal complaints from Major Stuart McCarthy, who recently broke ranks to condemn an alleged "culture of denial, deceit and impunity" at the top of Defence.

McCarthy, who took the drug while serving in Ethiopia and Eritrea in 2001, said he experienced depression and mild suicidal tendencies on duty and was diagnosed with depression on his return to Australia.

"I have vertigo, hearing problems, cognitive impairment and problems with working memory and difficulty with concentration."

Other members have describing taking the drug on tour as equivalent to "living in a heavily armed lunatic asylum" with anxiety attacks and waking from nightmares screaming and punching walls.

Documents obtained by Fairfax Media in late November revealed Chief of Army Lieutenant-General Angus Campbell did not support a campaign against mefloquine because it would deny deployment opportunities, despite acknowledging the side effects.

The majority of soldiers and veterans who spoke to Fairfax Media are not seeking compensation but are demanding answers from Defence over their trauma, and support for other veterans.

After meeting with Major McCarthy and other veterans, RSL national medical advisor Dr Roderick Bain has raised concerns about a lack of formal recognition of mefloquine side effects with the federal government's Repatriation Medical Authority.

Dr Bain also called for an official inquiry, claiming many veterans had been incorrectly diagnosed with post traumatic stress disorder, wrongful discharged and exposed to depression.

A spokesman for drug company Roche, which produces mefloquine under the brand name Lariam, said more than 39 million patients had received the drug worldwide since its first approval in 1984.

The Therapeutic Goods Administration warns that public patients with a history of depression, anxiety disorders or other psychiatric illness should not be prescribed the drug.