Qantas and Virgin have cancelled all flights into and out of Sydney and Melbourne. Adelaide airport has been shut and Canberra flights also hit.
Last week, tens of thousands of people were stranded as airlines grounded flights, and now the ash has returned.
The plume is said to be too low this time for airlines to fly under it.
The ash cloud from Chile's Puyehue-Cordon Caulle volcano is circling the Earth for a second time.
Last week, some airlines, such as Virgin Australia, flew below and around the ash cloud, but this time they have been advised against doing so.
The ash cloud is reported to be hovering at between 20,000 and 40,000ft (6-13km).
More than 120,000 air passengers are expected to face travel disruption.
Qantas said its policy was not to fly below the ash cloud, because it brought risks that it was simply not prepared to take.
"We estimate that we will be cancelling in excess of 200 flights on Wednesday," Qantas spokeswoman Olivia Wirth told reporters.
"The experts say we simply won't be able to operate in this situation."
Knock-on effects
Australia's Bureau of Meteorology estimates Adelaide will be affected for 24 hours, Canberra and Sydney for around 36 to 48 hours, and Melbourne for 36 to 48 hours from Wednesday.
International flights inbound to Sydney have been diverted to Brisbane, ABC News reported.
Virgin's domestic cancellations alone will affect 170 flights.
Qantas' budget airline Jetstar also cancelled Adelaide and Sydney flights, while Tiger Airways is reported to have grounded its entire fleet.
Civil Aviation Safety Authority spokesman Peter Gibson said hundreds of thousands of passengers would be affected across the country.
"When you take out major centres like Sydney and Melbourne, the knock-on effects of that are huge, and that's unfortunate, but safety has to come first.
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