An image from Twitter believed to show Jake Bilardi posing with Isis militants in Iraq.
Australian reportedly killed in Iraq suicide bombing had plotted attack on native soil.
A teenage Melbourne terrorist who reportedly died in a suicide bombing in Iraq had previously been plotting an attack in Australia.
Jake Bilardi, 18, left Melbourne in August 2014 and is understood to have flown via Turkey to Iraq.
Australian authorities are seeking to verify reports Bilardi was one of about a dozen Isis (Islamic State) extremists to set off suicide car bombs in the Iraqi city of Ramadi early yesterday morning.
An image released on the internet appeared to show Bilardi driving a white van, typically used by Isis as mobile suicide bombs, with the caption "may God accept him".
He had previously appeared in an image holding an assault rifle released by Isis in December, having taken on the name Abu Abdulla al-Australi.
Foreign Minister Julie Bishop said she was aware of reports that police had found bomb-making materials in Bilardi's Melbourne home, and was seeking a briefing on it.
She was able to confirm she had cancelled Bilardi's passport on security advice in October and he had been on Australian authorities' radar since then.
At least 20 Australians have been killed in the conflict and 100 passports have been cancelled on national security grounds.
"It is a senseless and cruel and violent end for many of them, and if Jake Bilardi is another example of this, well then the tragedy deepens further," she said.
Prime Minister Tony Abbott described the unconfirmed death as an "absolutely horrific situation".
"It's very, very important that we do everything we can to try to safeguard our young people against the lure of this shocking, alien and extreme ideology," Abbott said.
BBC journalist Secunder Kermani previously made contact with an Isis supporter he understood to be Bilardi. Kermani said Bilardi had tweeted on several occasions his support for attacking Australia because of its role in the military coalition against Isis.
"He also told me back then that he was on the waiting lists to be a suicide bomber, and he told me that he was ... planning to do a suicide bomb attack in a car," Kermani told the ABC.
Bilardi himself wrote in blog posts that he wanted to bomb foreign consulates and political targets in Australia, as well as launch attacks on shopping centres, before dropping the idea.
"I realised that the authorities were oblivious to my plans but if anything was to attract their attention it would be my purchasing of chemicals and other bomb-making materials," the post said.
Bilardi is understood to have also fought in the Iraqi city of Baiji.
Twelve car bombs exploded almost simultaneously around the central Iraq city of Ramadi yesterday morning, local police said.
At least 17 people were killed and 38 others wounded.
Bilardi reportedly became a confused and angry atheist after losing his mother to cancer in 2012, living with his two older brothers and a sister after the death and converting to Islam.
When he initially went to Syria he was supporting groups such as Jabhat al-Nusra, but when he looked into Isis he became attracted to its methods and ideology and joined it.
Bishop said it was important for families to report any concerns they had about their children being radicalised online.
"They are our front line," the minister said.
The Government is consulting Facebook, Google and other internet companies about taking down online content that could have a radicalising effect.