Anthony Albanese has taken aim at the coalition and the Greens, warning the major parties not to "politicise" the Hamas-Israel conflict.
It follows tensions coming to a head in the nation's capital cities between pro-Palestinian and pro-Israeli protesters.
Foreign Minister Penny Wong faced a grilling in the Senate from the Greens and coalition over comments she made on Sunday that "we all want to take the next steps towards a ceasefire, but it cannot be one-sided".
Opposition Leader Peter Dutton criticised the foreign minister's comments and asked if this was the government's position.
In response, the prime minister urged politicians not to fan the flames as cracks emerged in Australian society.
"We know that we have a responsibility to not seek to politicise these matters but to engage in a principled way," he told parliament.
He said it was important people in positions of leadership exercised that in "a responsible way".
Senator Wong said clashes in the Melbourne suburb of Caulfield between pro-Palestinian and pro-Israeli protesters were "utterly unacceptable" and must not be repeated.
"The Jewish community in this country has a right to feel safe, and to be safe," she said.
"No one in this country should be fearful because of who they are or the faith they practise."
She said there was no place in Australia for anti-Semitism or Islamophobia.
The Greens demanded the government call for a ceasefire in the Hamas-Israel conflict.
Nationals Senate leader Bridget McKenzie claimed Senator Wong's comments were an "equivocation".
"Calling for a ceasefire as if there was some equivalence between the actions of Hamas and the actual reality of war is absolutely appalling and it needs to be highly condemned," she told Seven's Sunrise program.
Mr Albanese said Senator Wong did not call for a ceasefire, but had reaffirmed the position held by the government.
Palestinian officials said two babies died following Israeli strikes at the Al-Shifa hospital complex, as the number of people killed in Gaza reached more than 11,000.
Greens leader Adam Bandt said the government's stance did not go far enough.
"Let's be clear, Labor backs the invasion, Labor is not calling for a ceasefire, putting the Labor government increasingly out of step with most of the rest of the world," he said.
French president Emmanuel Macron called for a ceasefire in an interview with the BBC over the weekend and said there was "no justification" for bombing and killing civilians.
At the end of October, the United Nations passed a resolution for an "immediate, durable and sustainable humanitarian truce", though Australia abstained from the vote.
Large demonstrations took place across Australia at the weekend, with police saying 45,000 people attended a pro-Palestinian rally outside the state library in Melbourne.
The rally on Sunday followed violent clashes on Friday night after a Palestinian business in Caulfield in the city's southeast was firebombed.
A survey published last week by pollster YouGov found 53 per cent of Australians supported an immediate ceasefire between Israel and Hamas, compared to 26 per cent who did not.
Roads were closed in Sydney's CBD for the fifth weekend in a row as a pro-Palestinian demonstration took place in Hyde Park, while members of the Jewish community gathered in Moore Park to hold a vigil for people taken hostage in the war.
Liberal MP Julian Leeser said he would wear a Jewish kippah head covering this sitting week, saying he hoped it would "remind the parliament that our country is made up of people of many faiths as well as those with none at all".
