A statement said all employees involved in the strike would be locked out from Monday evening with all international and domestic flights grounded from 0600 GMT on Saturday. Aircraft currently in the air will continue to their intended destinations, but there will be no further departures.
The airline has been hit by a series of strikes since the company's management announced a restructuring and outsourcing plan in August. The union members have expressed concerns about the proposal, saying it would result in job cuts in Australia.
Chief executive Alan Joyce called his decision "unbelievable".
The airline issued a statement saying customers booked on Qantas flights should not go to the airport until further notice. Full refunds will be given to those affected by the grounding.
Baggage handlers, engineers and pilots have been involved in the industrial action costing the company A$15m (£8.82m) a week. Total costs are estimated at A$68m (£42.8m) the company said.
Anthony Albanese, the Australian minister for transport, said the government would take action to intervene in the dispute. He said the government had received no advance notice of Qantas' plans to ground flights, and was very concerned about the decision.
Mr Albanese said the government was making an urgent application to an industrial court to bring an end to all industrial action at the company.
He said: "This will be aimed at both actions by unions and by Qantas management."
Announcing the grounding of the airline, Mr Joyce said on Saturday: "The airline will be grounded as long as it takes to reach a conclusion on this."
He said that he would not take "the easy way out" and agree to union demands. "That would destroy Qantas in the long term."
"I'm actually taking the bold decision, an unbelievable decision, a very hard decision, to ground this airline."