It's alleged the 59-year-old, who is described as a naturalised Australian citizen of Korean descent, was involved in "brokering sales and discussing the supply of weapons of mass destruction" with the rogue nation.
The man is also suspected of attempts to transfer coal from North Korea to Indonesia and Vietnam, according to the statement.
The Australian government has repeatedly expressed its support for the U.S. in opposition to the actions of the North Korean regime.
He is believed to be of South Korean decent and has been living in Australia for more than 30 years.
The man is alleged to have acted as an economic agent for North Korea, in breach of both United States and Australian sanctions.
It will be alleged in court the man was involved in: "brokering the sale of missiles and missile componentry and expertise from North Korea to other global entities", the police statement read.
Police will allege the man tried to broker the sale of missile components, including software for the guidance systems of ballistic missiles, as well as trying to sell coal to third parties in Indonesia and Vietnam.
In October North Korean state media said Australia was "showing risky moves of zealously joining the frenzied political and military provocations of the USA against DPRK".
No weapons or missile componentry ever came to Australia, and authorities said there was no threat to the Australian community.
"This man is a loyal agent of North Korea, believing he was acting to serve some higher patriotic goal".
He was arrested in the Sydney suburb of Eastwood on Saturday and was due to face court later on Sunday, police said. "But we estimate, if these trades had been successful we would be talking tens of millions of dollars".
But police insisted the man's actions did not pose any "direct risk" to Australians, with the actions occurring offshore.
The maximum penalty for the offences is 10 years' imprisonment.
"Any individual who attempts to fly in the face of sanctions can not and will not go unnoticed in Australia".
Investigations are continuing and further charges against the man have not been ruled out.