"The outage started at 1.15 pm and had an impact on customers attempting to log in or surf the Internet," Telstra said in a statement, noting it affected both ADSL and cable customers.
Telstra did not provide any indication as to how many customers experienced problems but said service was restored nearly three hours later.
Telstra engineers rectified the situation which affected some users in Queensland, New South Wales, Victoria, the ACT and Tasmania, the company said.
"We suspect that the problem was caused by a software issue although investigations are continuing.
"The main issue here is that the services are now up and running," Telstra spokesperson Warwick Ponder told ZDNet Australia.