Australia and Indonesia are two very different countries with little in common other than geography. Their distinctive histories, cultures and identities have meant that the bilateral relationship has often been difficult and characterized by frequent misunderstandings and uncertainty. As close neighbors, however, they have had little option other than to try to make the best of their historical circumstances. This paper analyses the different strategic cultures, policies and perspectives that have emerged in both countries. We argue that despite their differences, the current international order offers an opportunity for “middle powers” to play a more prominent role–if they can recognize their mutual interests and potential as members of a region of growing international importance.