Prime Minister Gillard said the death was a "dreadful blow'' for the nation.
"I know Australians today will stop, will pause, will reflect and will mark with respect the loss of this brave soldier and will honour his service and his sacrifice,'' Ms Gillard said.
"On behalf of the Australian nation I extend all of our condolences to his family as they mourn his loss.
"The defence family will be there to support them, the Australian nation will be there to support them, but we know they will face so many difficult days ahead."
The latest death may cause many Australians to ask why our forces are still in Afghanistan, the prime minister said.
"This tragic incident is part of what we are doing in Afghanistan because that mission is so important to our Australian nation,'' she said.
"We went there to make sure that Afghanistan would not continue to be a safe haven for terrorists.
"We will continue our mission in Afghanistan even as we grieve his loss.''
Defence Minister Stephen Smith said the loss would be very deeply felt within the special forces community and in Perth where the SASR holds an iconic status.
His death is the first for Australia since Captain Bryce Duffy, Corporal Ashley Birt and Lance Corporal Luke Gavin were shot dead by a man in an Afghan army uniform during morning parade on October 29 last year.
"Indeed, our first in some seven or eight months and over such a period of time, though one constantly says that one has to steel oneself for more fatalities, you can lull yourself into a false sense of security,'' Mr Smith said.
"So this tragic loss will reverberate through the Australian community today.''
Gen Hurley said the soldier enlisted in 1990 and joined the SASR in 1995.
He was greatly respected by his colleagues and was on his seventh tour of duty in Afghanistan.
It was "unusual" that the soldier had been on so many tours but he said he was confident there were proper processes in place to ensure soldiers were not being asked to do too much.
"It's an issue we need to keep a sharp eye on," he said.
The man was the only casualty and was wearing his normal combat body armour at the time of the incident.
Gen Hurley declined to give any further personal details, including where the man was originally from and whether or not he was married.
"Family still needs to contact wider family so we'll let them go through that process and then we'll release those details when we're ready,'' he said.
The anti-insurgent operation is ongoing.
- AAP
