The carrier, which has been hit by a series of strikes, said all employees involved in the action would be locked out from Monday evening and flights grounded from 06:00 GMT on Saturday.
"Pilots, licensed engineers and baggage, ground and catering staff are essential to Qantas operations and the lock-out will therefore make it necessary for all Qantas aircraft to be grounded," the airline said.
"Aircraft currently in the air will complete the sectors they are operating. However, there will be no further Qantas domestic departures or international departures anywhere in the world."
Months of strikes by baggage handlers, engineers and pilots were costing the company A$15m (R123m) per week, it said, with the total financial impact so far hitting A$68m (R560m).
108 planes to be grounded
Approximately 70 000 passengers had been affected ahead of the announcement and more than 600 flights cancelled.
The embattled company's shock decision to ground all aircraft will affect 108 planes at 22 airports.
"The airline will be grounded as long as it takes to reach a conclusion on this," said chief executive Alan Joyce in a hastily called press conference, adding that he could not take "the easy way out" and agree to union demands.
"That would destroy Qantas in the long term," he said.
"I'm actually taking the bold decision, an unbelievable decision, a very hard decision, to ground this airline."
Unions have been protesting pay and restructuring plans and the decision to ground the planes came a day after a fiery annual general meeting.
At the AGM, Qantas management came under fire for its plans to refocus the airline on Asia with one union boss saying the series of strikes could go on until mid-2012.
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