Co-founders Scott Farquhar and Mike Cannon-Brookes announced the Sydney-based software company would lay off 500 employees on Tuesday, minutes before affected staff were notified by email.
In their memo, the Australian billionaire pair stated workers in talent acquisition, program management and research will be most affected.
AAP understands that about 120 Australian staff will be let go as part of the cuts. Approximately a third of Atlassian's 10,000-strong workforce are based locally.
The pair said the restructuring was motivated by a need to adapt to a "changing and difficult macroeconomic environment".
"To be clear, this decision is not a reflection of Atlassian's own financial performance, as we will be reinvesting in roles that better support our priorities," they wrote.
"As a company, we have massive growth opportunities in front of us, particularly across cloud migrations, ITSM, and serving our enterprise customers in the cloud.
"Although hard, this rebalancing will help us put more wood behind these arrows."
The move comes just months after Atlassian conducted a massive recruitment drive, hiring 1032 new roles.
"There are still more tech jobs out there than there are people to fill them," Mr Farquhar said in October.
"One of the things we've got is we can hire people all across Australia and New Zealand, around the world. If someone wants a job in the tech industry, there are really high paying jobs, people stay in the industry longer."
Several big tech companies, including Amazon, Microsoft and Twitter, have recently laid off thousands of staff as economic pressures weigh down on the interest rate-sensitive industry.
According to headcount live-tracker layoffs.fyi, tech companies have sacked more than 123,000 workers since the start of 2023.
Unlike at companies such as Twitter, where employees only found out they lost their jobs when they were unable to access work log-ins, affected staff at Atlassian will continue to be able to interact with their teams for a few more days.
"We know the industry standard is to block access to communication tools immediately," Mr Farquhar and Mr Cannon-Brookes wrote.
"This approach didn't feel right to us."
Despite plummeting 27 per cent over the past 12 months, shares in the Nasdaq-listed company have recovered in recent months, up 36 per cent since the start of the year.
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