Prime Minister Anthony Albanese says the government is confident of taking control of a site ruled out for a new Russian embassy despite the presence of a squatter.
A Russian diplomat has been seen living in a shed on the site where his country was blocked from building a new embassy near Parliament House in Canberra.
Australian Federal Police officers are watching the man, but have been unable to arrest him because he has diplomatic immunity, The Australian newspaper reported.
Parliament swiftly passed laws which terminated the lease from June 15 after advice was received on the security risk presented by the new embassy.
"We are confident of our legal position and our national security committee considered this - we anticipated Russia would not be happy with our response," Mr Albanese told reporters in Canberra on Friday.
"Processes are under way for the commonwealth to formalise possession of the site.
"The national security threat that was represented by a Russian embassy on-site is not the same as some bloke standing on a blade of grass on the site that we don't see as a threat to our national security."
Moscow is expected to launch legal action to challenge the legislation.
Kremlin spokesman Dmitry Peskov last week slammed the decision, accusing Australia of "Russophobic hysteria" and warning of retaliation, saying it was "another unfriendly display from Australia".
Russia's existing embassy in the inner-south suburb of Griffith will not be affected by the decision.
The National Capital Authority granted the lease for the Yarralumla site in December 2008, and building approvals followed in 2011.
Under the lease conditions Russia had agreed to finish construction within three years, but it remains partially built.