Scott Morrison has raised concerns about escalating violence between Israel and Palestine, which the United Nations fears could explode into full-scale war.
The prime minister has also expressed disappointment after a woman was charged in western Sydney for burning an Israeli flag.
Dozens of people have been killed in the worst violence between Israelis and Palestinians in several years and which shows no sign of letting up.
The conflict flared up after Israeli forces tried to forcibly evict Palestinians from their homes in the neighbourhood of Sheikh Jarrah and stormed the al-Aqsa mosque in Jerusalem.
Mr Morrison said it was important the conflict in the Middle East did not spill onto the streets in Australia.
"Of course we are all very concerned about what is happening there," he told 2GB radio on Thursday.
"We have been urging restraint from all parties involved there to not take any unilateral action on those very stressful and tense situations we are finding there.
"But those things should not be played out here in Australia."
Mr Morrison restated the government's policy of a two-state solution between Israel and Palestine, describing Australia as an agent for peace.
He urged Australians with ties to the conflict to act with tolerance and respect.
"By all means, people can have concerns and views, and there is a tolerance for that, but at the same time we do not want to import the troubles of other parts of the world into this country."
The fighting erupted on Monday night after weeks of rising tensions.
At least 65 Palestinians and six people in Israel have since died in the heaviest exchange of air strikes and rocket fire since the two sides fought a war in 2014.
UN diplomat Tor Wennesland urged restraint from both sides.
"Stop the fire immediately. We're escalating towards a full-scale war," he tweeted.
"The cost of war in Gaza is devastating and is being paid by ordinary people. UN is working with all sides to restore calm. Stop the violence now."
Various countries including the United States have also called for calm.
Australian Associated Press