The Australian and PNG governments made the announcement months after PNG's Supreme Court ruled the Manus Island camp is unconstitutional, and amid public and legal pressure for Australia to find a sustainable and safe solution for the detainees.
Immigration Minister Peter Dutton says a meeting on Wednesday with PNG's Prime Minister, Peter O'Neill, followed months of discussions about the closure of the regional processing centre on Manus Island.
But Mr Dutton isn't prepared to say when that's expected to happen.
He's reiterated that none of the hundreds of male detainees will be resettled in Australia, and indicated they won't go to Nauru - the site of Australia's other offshore detention camp and, most recently, the subject of renewed reports of abuse and self-harm.
Mr Dutton says Australia will provide more financial support to PNG to help resettle those who've been granted refugee status.
But he's told the ABC Australia will follow PNG's lead.
"This is an issue for the PNG government. We will work with them. We're not going to be dictated to by any other country about what happens within our processing centres here, within our country. We've been able to close 17 of the 17 (centres) Labor opened. We've been able to get kids out of detention. And we'll work with PNG for the best possible outcome and we'll provide support to help those people return to their country of origin and if there's some third-country arrangement, then we're happy to provide support to that."
Ian Rintoul, from advocacy group the Refugee Action Coalition, believes the timing of the announcement is questionable.
He's been in PNG following hearings in the Supreme Court after it ruled in April that the Manus Island camp was unconstitional and must close.
"It's too convenient. The PNG Supreme Court ordered the Australian government and PNG government to close Manus Island on April 26. Three months later, three days before the Supreme Court full bench is going to meet again to consider orders about the closure of Manus Island suddenly Peter O'Neill and Peter Dutton have met. So, we are extremely suspicious of the motivations of the Immigration Minister."
Next week the PNG Supreme Court will hear arguments about which country should be held legally responsible to resettle the asylum seekers and refugees on Manus Island.
Some of them are being represented in the court by lawyer Ben Lomai.
He says announcements the facility will close are merely political statements, and won't affect his case.
"Basically, what I'll be asking will be for an order for the release of all the asylum seekers, and that includes those that have already been given refugee status and those that haven't been given refugee status, as well as asking that the court will have to release them into the care of the Commonwealth government. At the same time we will be also asking them for compensation as well."
The federal opposition wants more details on the way foward, including how much money Australia is giving to PNG and potential resettlement destinations.
New Zealand has previously offered to take some of the Manus Island detainees, and West Australian Premier Colin Barnett says his state is prepared to do the same.
The Immigration Minister, though, says Australia is talking to third countries about possible options.
Meanwhile the Greens, legal experts, non-government organisations and human rights groups continue to call for them to be brought to Australia.
Daniel Webb, from the Melbourne-based Human Rights Law Centre, says it's the only humane solution.
"It is really unsustainable. If settlement in PNG was a realistic option it would have happened three years ago. So they're out of options. People have been on a long, painful road to nowhere for the last three years. As long as the Immigration Minister, you know, he'll keep pretending otherwise, but the reality is there is one way forward and that's to bring them here."
The United Nations, too, has been critical of conditions in Australia's offshore detention system.
Its children's agency, UNICEF, says the Peter Dutton should consider resettlement options in credible third countries that are equipped to respond to the complex needs of refugees and their families.
Nicole Breeze is UNICEF Australia's Director of Policy and Advocacy.
"Australia's offshore processing regime has created conditions in which already vulnerable people have been at risk of greater harm. Quite a number of the 850 people on Manus Island arrived as children. Over the last three years UNICEF Australia has expressed serious concerns regarding the safety of unaccompanied children who are held in the regional processing centre on Manus Island. A number of boys arrived in Manus Island without their parents or families and they've grown up in an unsafe, institutionalised setting, and they've been surrounded by highly-distressed adults. So, the impact of this is a situation where you have young people and children who are fleeing from difficult situations of conflict and war, arriving in harsh environments, and this is compounding the trauma experience. What we're seeing is now a group of people who have quite complex resettlement needs."
