Both nations launched the proceedings in the International Civil Aviation Organisation, naming Russia as responsible for the incident under international law.
The flight was shot down on July 17, 2014, killing all 298 people onboard, including 38 Australians.
Prime Minister Scott Morrison said the legal action was a major step forward in truth and accountability for a "horrific" act of violence.
"The Russian Federation's refusal to take responsibility for its role in the downing of Flight MH17 is unacceptable and the Australian government has always said that it will not exclude any legal options in our pursuit of justice," Mr Morrison said in a joint statement.
The legal action carried out by both countries will come on top of Dutch prosecution of four suspects over their individual involvement in the incident.
Australia and the Netherlands are seeking from the International Civil Aviation Organisation a declaration that Russia broke the civil aviation conventions, also known as the Chicago Convention.
The two nations are also seeking to order Russia into negotiations over the incident for reparations.
Foreign Minister Marise Payne told reporters in Sydney that Australia would pursue all legal avenues.
"Russia to date has refused to acknowledge and take responsibility for its clear role in this horrific incident," she said.
Australia and the Netherlands will rely on "overwhelming" evidence that the flight was brought down by a Russian missile in eastern Ukraine, an area that was under the control of Russian-backed separatists.
The missile belonged to Russia's 53rd anti-aircraft military brigade, and was accompanied by a trained Russian military crew.
Both countries said evidence showed the missile could only have been fired by the trained Russian crew, with the missile system later returned to Russia shortly after the incident.
Attorney-General Michaelia Cash said the pursuit of accountability was a priority not just for Australia but for the Netherlands as well.
"(The downing of the flight) caused tremendous grief and suffering to the next of kin of the victims, pain aggravated by the absence to date of any acknowledgement by Russia," she said.
"These rules must be upheld so people can fly safe in the knowledge that their lives will not be taken from them by deliberate acts of violence. Russia flouted these rules with tragic consequences."
The legal action over MH17 comes as several western nations have imposed crippling sanctions against Russia for their invasion of Ukraine.
"Russia's unprovoked and unjustified invasion of Ukraine and the escalation of its aggression underscores the need to continue our enduring effort to hold Russia to account for its blatant violation of international law and the UN Charter," Mr Morrison said.
The foreign minister brushed off concerns the legal action could exacerbate tensions between Russia and other nations in the wake of the invasion.
"Russia and Russia's actions are exactly what is exacerbating tensions, and I'm afraid that is not a phrase I would use between Russia and Ukraine," she said.
"Wholesale breaches of international law, complete violation of the UN charter is rather more significant than just exacerbating tensions."
Russia withdrew from negotiations with Australia and the Netherlands about MH17 in October 2020.
Russia did not return to the negotiating table, despite repeated requests from Australia and the Netherlands.
Senator Payne said Australia had not seen signs of good faith from Russia since the breakdown of negotiations.
"If Russia was prepared to return to the negotiating table, that we had been participating in with the Netherlands, that would be a matter that we could consider," she said.
Mr Morrison said the legal efforts would help to provide justice to the families of the victims.
"While we cannot take away the grief of those whose loved ones died as a result of Russia's actions, the Australia government will pursue every available avenue to ensure Russia is held to account so that this horrific act never happens again," he said.
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