The federal and South Australian governments would "combine dollar for dollar on administration" to ensure the steelworks keep operating, staff are paid and creditors are paid, while a new owner is found, Mr Albanese told steelworkers in the town on Thursday.
"But in addition to that, between our two governments, we have $2.4 billion to make sure that this transition occurs," he said.
A day after the South Australian Government rushed legislation through parliament that allowed it to place steelworks owner GFG Alliance into administration, Mr Albanese said Australia "cannot just be a quarry that exports things overseas, waits for jobs to be created, waits for value to be added, and then import it back".
The funding will deliver $100 million in immediate support, including creditor assistance payments ($50 million), infrastructure upgrades ($32.6 million), jobs matching and skills hub ($6 million) and stabilising the steelworks ($384 million).
The state and federal governments will jointly invest $384 million to fund the steelworks' operations during administration, ensuring workers and contractors keep working and continue to be paid.
Another $1.9 billion has been allocated to investing in upgrades and new infrastructure to ensure the steelworks has a sustainable future.
GFG had been under intense pressure from the government to pay debts to creditors of the steelworks and the state, which is owed "tens of millions of dollars", including $15 million to SA Water.
Administrators KordaMentha said keeping the steelworks running would "preserve around 4000 direct and indirect jobs".
The SA government has deferred plans for a $600 million hydrogen plant at Whyalla, and that funding will be directed to the support package, as well as $50 million from the Whyalla Steelworks Operational Efficiency Improvements Fund.
SA Premier Peter Malinauskas said he was "never going to allow a taxpayer funded bailout of GFG".
"Now that the steelworks is no longer under the control of GFG, the state government can partner with the federal government and make the long-term investments necessary to secure the future of Whyalla and Australian steel making," he said.
The federal government also announced a new green iron investment fund to boost green iron manufacturing and supply chains.
Up to $500 million from the fund will support the longer term transformation of the steelworks, and make financing available to the future steelworks owner to upgrade the facility to produce green iron.
Opposition Leader Peter Dutton said the government's approach to the renewable zoning policy has been a disaster.
"There's no greater example of it than in South Australia right now. If the Prime Minister wants to continue this game, then there are going to be job losses in Whyalla," he told radio 2GB.
"I think the premier of South Australia realises that the game is up, a lot of taxpayer money has been wasted. If the government's continuing to put good money after bad with green hydrogen, then they will do damage to the economy and those local jobs at the Whyalla steel works will be lost."
GFG's owner, UK billionaire Sanjeev Gupta, said the state was on the "wrong course" in forcing the operation into administration and he was seeking legal advice, according to an internal company memo obtained by The Australian Financial Review.
Mr Gupta last Friday said a debt settlement deal had been reached with creditors of global financier Greensill Capital, which had advanced billions of dollars in credit to GFG before collapsing in 2021.
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