Dairy giant Fonterra is selling its Australian yoghurt and dessert business.

Another Australian company is buying the operation and taking on existing staff.

Fonterra is still heavily invested across the Tasman, recently committing more than $120m to a factory rebuild in Victoria.

It's also commissioning a new beverage plant and expanding its popular brands throughout the country.

Australia is Fonterra's largest milk pool outside New Zealand.

The changes are aimed at delivering stronger returns to farmer shareholders.