Future generations will be reminded of alleged unlawful Afghan killings when they see the gap in Special Air Service squadron numbering, the chief of the army says.
The SAS second squadron has been disbanded following a damning report.
An investigation by Justice Paul Brereton found there was credible evidence of 23 incidents in which a total of 39 Afghan nationals were unlawfully killed.
Australia's defence chief Angus Campbell told reporters the Chief of Army Rick Burr had advised the Special Air Service Regiment on Thursday the second squadron had been "struck off the Army order of battle".
"Not because it was the only squadron involved in these issues, but because it was at a time one of the squadrons involved in the allegations made," he said.
The Army chief would "over time" adjust and re-raise a different squadron, which would have a different title, General Campbell said.
Lieutenant General Burr said the decision wasn't reflective of the current members of the squadron, but they would be reassigned to other units.
"As the chief of army this is not a decision I have taken lightly," he said in a statement.
"The issues in the inquiry report are so shocking that a clear message is required.
"Future generations will be reminded of this moment in our military history from the gap in our squadron numbering system."
Lieutenant General Burr will accelerate existing plans for personnel in Special Operations Command to take up postings outside of the command.
"It's important we learn from this experience and begin the healing process so we can focus on the future. This must never be allowed to happen again, anywhere in our army," he said.
"Our profession demands we must always operate lawfully, ethically and responsibly. Even in the most complex and challenging environments."
The Australia Defence Association supports scrapping the second squadron.
"It sends a powerful and symbolic message, not just now but essentially for all time," executive director Neil James told AAP.
"It will disappoint veterans who have served in that unit in previous wars and no doubt make them angry. But unfortunately it's necessary for the greater good of the regiment and the army."