The proposal, which was announced on Thursday, is expected to strengthen competition, deliver more flights and create more jobs.
It is also expected to drive down airfares and benefit regional Australia through improved inbound tourism connections, sales and marketing visibility to these destinations, all while including necessary jobs safeguards, according to Australian Airports Association chief executive Simon Westaway.
"This deal is a major win for the aviation industry and the Australian flying public," he said.
The government approval came after cross-government consultation by Treasury, engaging the aviation industry, unions and other relevant stakeholders to ensure the deal was in Australia's national interest, Treasurer Jim Chalmers said.
The proposal's approval was subject to legally enforceable conditions to ensure Australian representation on Virgin's board and protection of its customer data, Dr Chalmers said.
The airlines have also committed to a secondment program that will place 20 pilots and 40 cabin crew in Doha to gain long-haul flying experience and creating backfill positions in Australia, and specific consultation with unions.
This follows a draft determination by the Australian Competition and Consumer Commission to allow the airlines to engage in co-operative conduct under an integrated alliance for five years, leading to 28 new weekly return services between Doha and Perth, Brisbane, Sydney and Melbourne.
"We welcome a new era for Virgin Australia," Virgin Australia Group chief executive Jayne Hrdlicka said.
"Qatar Airways' investment is a huge vote of confidence in our business and Australian aviation more broadly."
