In a report released on Friday, the eSafety Commission outlined how the providers of four major gaming platforms had responded to notices it issued in April.
It found there were big gaps in the behaviour of some companies, which could lead to immediate harm for children, commissioner Julie Inman Grant told Nine's Today.
"The primary demographic is eight to 13-year-olds. If you are a predator, whether you're a violent extremist or you're grooming for sexual purposes, you're going to go to the digital playgrounds where children are," Ms Inman Grant said.
The notices, issued to the providers of Roblox, Minecraft, Fortnite and Steam, required them to explain how they were meeting the government's Basic Online Safety Expectations.
The commission found some of the platforms had introduced additional safety mechanisms since receiving the notices, but significant gaps remained.
Among changes made include those implemented by Roblox in response to a court-enforced undertaking issued in August.
The gaming giant, which is the second most popular game platform among Australian children, agreed to introduce a number of additional safety measures.
This included introducing accessible reporting mechanisms, preventing adults from contacting unknown children without parental consent, as well as making children's accounts private by default.
In March, age assurance requirements were introduced for all gaming platforms. They mean companies must find out the age of a player and not serve children dangerous content, including things that contain sexual or self-harm references.
The push for compliance comes as the government continues to introduce reforms to its online safety legislation, which began with its world-first social media ban for children under the age of 16.
Further reforms announced in September would allow users to opt out of algorithmic social media feeds.
Australia's online child safety crackdown has been watched globally for some time. On Thursday, communications minister Anika Wells was named in Time's 100 rising stars list for her work in the area.
While gaming platforms are exempted from the government's social media ban for under 16s, Roblox began limiting access to certain features to Australians aged 18 and over in December.
Epic Games and Mojang Studios, the studios behind Fortnite and Minecraft, relied on users self-declaring their age and allowed users identified as aged 18 or over to access what the commission describes as high-risk features.
It includes all-ages chatrooms and, in the case of Minecraft, access to unmoderated third-party servers.
The report also found the level of industry collaboration varied across studios, with Mojang Studios and Roblox participating in multiple industry initiatives aimed at combating child sexual exploitation online while Valve, the developer behind online gaming marketplace Steam, did not.
"Australian children have a right to play online without being exposed to predators, sexual extortionists, violent extremist content or other harmful material," Ms Inman Grant said.
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