The offer came ahead of AUSMIN talks between the US and Australian defense and foreign affairs ministers in Sydney on Tuesday.
Australia has agreed to send two Hercules transport planes to help US and British airlift supplies.
Johnston said the Australian Defense Force could also offer military support.
"We're not ruling out providing some backup assistance to the Americans as they go in and deal kinetically with this terrorist organization," he told local radio.
"This terrorist organization [Islamic State] is to be extremely feared and taken with great seriousness. We've seen atrocities, we 've seen all manner of things. Who knows what the future holds with these people?"
"We are ready to assist in whatever way we can should we be asked to assist by the Americans and the Iraqi government.
"The fact is this could turn very, very nasty in a very short space of time and I think anything's to be expected. And I don't believe right-minded countries can just sit back and watch atrocities unfold on their nightly television without taking some action."
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The US last Friday launched air strikes aimed at stopping the IS advance.
US Defense Secretary Chuck Hagel, who arrived in Sydney on Monday, told reporters the air strikes had been "very effective" and was looking at ways Australia can further assist.
"We are working through specific areas of where the Australians can help," he said.
Hagel and US Secretary of State John Kerry will meet with Johnston and Foreign Minister Julie Bishop in Sydney on Tuesday and Iraq and Syria are expected to be on the agenda.
Sources: Xinhua -globaltimes.cn
11/8/14
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