As the once pariah country approaches the second anniversary of a quasi-civilian regime led by the ex-general taking power, Canberra said it was increasing its support to recognise the reforms.
"As a close neighbour, Australia will benefit from a more open and prosperous Myanmar that is fully integrated into the region," said Prime Minister Julia Gillard of the country formerly known as Burma.
"Australia's commitment to expand its constructive engagement with Myanmar recognises the unprecedented process of change underway there towards political freedom and the new opportunity this brings to help promote the prosperity of Myanmar and its people."
While Canberra said its arms embargo would remain, it announced an easing of restrictions on defence cooperation including humanitarian and disaster relief activities, as well as peacekeeping.
It will also appoint a defence attache to Myanmar and a trade commissioner.
Gillard said Australian $20 million (US $20.7 million) would be provided over two years for "strengthening democratic institutions, promoting human rights, improving economic governance and advancing the rule of law".
It will include funding for the Myanmar Human Rights Commission and a visit by Myanmar ministers to Australia to draw on the experience of mining experts.
Mining is considered vital to the Asian nation's future, but there are concerns about corruption, environmental safeguards and communities being displaced.
The trip is the latest example of Thein Sein's new-found globetrotting diplomacy that has seen him address the UN General Assembly, meet a host of European Union leaders and be feted at a number of international summits.
Myanmar has surprised observers with its reforms following the end of nearly half a century of military rule in 2011, prompting Western nations to start rolling back sanctions.
Since Thein Sein took over the presidency, hundreds of political prisoners have been released, elections have been held, and long-detained opposition leader Aung San Suu Kyi has been elected into parliament.
Thein Sein said he was determined his country continue on its democratic path.
"It is my sincere wish and aspiration that, like Australia, Myanmar will enjoy peace, democracy and prosperity," he said.
Thein Sein added that he was in Australia not just to request support and assistance, but to explain the changes that have been taking place.
"I hope that you appreciate that what we are undertaking has no equal in modern times. This is not just a simple transition ... but a transition from military rule to democratic rule," he said.
"From 60 years of armed conflict to peace. And from centrally controlled and isolated economy to one that can end poverty and create real opportunities for all our people."
John Blaxland, a Myanmar expert at the Australian National University's Strategic and Defence Studies Centre, said Canberra was keen to reward Thein Sein, but also wanted to keep Myanmar onside as the next Asean chair.
"The government wants to reward (him) for the work he has done, but it also partly Australia burnishing its regional credentials ahead of Myanmar becoming the next Asean chair," he said.
"Asean is a significant part of Australia's security and trading outlook and it is good for Australia if Asean is stable, robust and secure."
Myanmar is due to assume the Association of Southeast Asian Nations chairmanship from Brunei next year.
Australia's trade commission Austrade said Myanmar is an emerging economy with extensive natural resources, a growing population and numerous opportunities for its companies.
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