Robert Langdon, 38, who was working as a security contractor for the US-based firm Four Horsemen, was found guilty last October of killing the security guard, known as Karim, by shooting him four times in the head and body. The verdict was upheld by the Afghan Appeals Court last week.
The Australian government immediately protested the sentencing, and said it would make 'high level representations' to save Mr Langdon from execution.
"The Australian Government will make high level representations to Afghan authorities to oppose the imposition of the death penalty, and vigorously support any clemency bids in this case," a spokesman for the Department of Foreign Affairs and Trad (DFAT)said this morning.
"We have been consulting closely with Mr Langdon's lawyers and his employer about appropriate representations in this case. This is consistent with the Australian Government's strong opposition to the use of the death penalty."
Australian Prime Minister Kevin Rudd said DFAT had advised him that Mr Langdon's lawyers had appealed the sentence.
"Consistent with what we have done in the past and we'll do in the future, we as the government always intervene in support of any Australian citizen who is being convicted of a capital offence," Mr Rudd told Fairfax Radio.
"We'll be doing so on the closest advice of the Department of Foreign Affairs who'll be following the case in Kabul," he said.
The Australian newspaper reported that the killing happened last May, when Mr Langdon was part of a team made up of 60 Afghan and expatriate guards protecting a supply convoy that had been attacked by Taleban insurgents. He led the expatriates, while Karim was the team leader of the Afghans.
When the convoy approached the town of Maiden Shar, 35 miles (40km) from Kabul, the men argued violently after Karim refused to continue, saying the road ahead was too dangerous.
In court, Mr Langdon admitted killing Karim, but claimed diminished responsibility, saying he fired in self-defence after his Afghan colleague reached for his pistol.
"He reached across, and I am ex-military, so it was like bang-bang-bang-bang. I didn't have time to think." he said.
"We had just been hit (by the Taleban), we didn't know what was happening and everyone was antsy. I was too, Karim probably was too," he added.
However his claims were undermined by witnesses who said that Karim was unarmed, and by Mr Langdon's own admission that he had tried to cover up the killing by tossing a hand grenade into the truck containing Karim's body.
He also admitted under questioning by the judges that he had burnt the vehicle containing Karim and concocted a false explanation for the security guard's death, but he told the court they were the actions of a 'confused man' who had decided to leave Afghanistan.
After the killing, he had told the convoy's guards to fire into the air to fake a Taleban attack so it would appear that Karim had been a victim of the Taleban. He then returned to Kabul alone, empted his bank account and bought a ticket to Dubai. But he was arrested at the airport as he tried to board the flight.
Rejecting his appeal, Jude Abdul Khalil Modafe told Mr Langdon he would hang unless he could obtain forgiveness from the victim's family. Under the Afghan tradition of ibra, (forgiveness), a family may forgive the death of a family member in return for a compensation payment. Mr Modafe told Mr Langdon: "You must convince them."
The Australian reported that lawyers acting for Mr Langdon were close to reaching a settlement with the victim's family. Mr Langdon's family refused to confirm that the family was fund-raising to pay compensation.
"There are delicate local negotiations going on " said Katie Godfrey, Mr Langdon's sister.
A handful of Australians have been executed overseas in recent years, mostly for drug trafficking crimes - most recently Van Tong Nguyen, who was hanged in Singapore in 2005 despite top-level appeals from the government. He had been convicted of importing heroin.
In a case that has become a local cause celebre, two young Australians, Scott Rush and Matthew Norman were sentenced to death in Bali in 2006 for their part in an attempt to smuggle 18 lb (8.3 kg) of heroin from Indonesia to Australia.