Daniel Edmund Duggan was arrested in Australia in October 2022 at the request of the US government, which accuses him of breaking arms control laws.
It alleges he illegally trained Chinese military pilots between 2010 and 2012, after he left the Marines. Duggan has denied the charges.
Attorney-General Mark Dreyfus said Monday that Duggan "should be extradited to the United States to face prosecution for the offences of which he is accused".
"Duggan was given the opportunity to provide representations as to why he should not be surrendered to the United States. In arriving at my decision, I took into consideration all material in front of me," he said in a statement.
Dreyfus would not comment further on the timing of the extradition.
Duggan's wife Saffrine said in a statement the family was "shocked and absolutely heartbroken".
She added it was a "callous and inhumane decision which has been delivered just before Christmas, with no explanation or justification from the government".
"It is very difficult to explain to the children why this is happening to their father, especially now, at this time of year.
"We are all terrified that we may not see him for a very long time. My children are very, very sad."
The family was informed the extradition would occur sometime after December 30 and before February 17.
Duggan's lawyers and family are considering what legal options they may have left.
The Attorney-General has been contemplating Duggan's future since May, when an Australian court ruled the pilot was eligible for extradition to the United States.
A highly regarded jet pilot, Duggan spent 12 years in the US Marine Corps, reaching the rank of Major and working as a tactical flight instructor.
The father of six moved to Australia in 2002 after leaving the Marines, gaining citizenship and working in an adventure flight company called Top Gun Tasmania.
He has been behind bars for 26 months, his family added in a statement.
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