Australia's foreign minister plans to speak to Nauru's president about rule of law on the Pacific island.
Julie Bishop's concern follows the arrest of several Nauru opposition MPs and the seizure of their passports.
Australia has one of its offshore asylum seeker processing centre on Nauru and relies on the nation's justice and legal system to operate it.
New Zealand and other Pacific nations also raised concerns at a Pacific Islands Forum in Sydney this week.
The summit primarily discussed the response to a potential natural disaster in the region, but the political situation in the tiny island nation was also discussed.
Nauru's government has denied there is a "breakdown in democracy".
'Natural justice'In recent weeks it has suspended opposition MPs from parliament without pay for giving interviews critical of the government to foreign media.
In June, a protest outside the parliament building led to the arrest of three opposition MPs.
Two are still in custody and another has been prevented from going to New Zealand to see his family.
The government said the MPs were participating in a violent riot and would be entitled to a fair trial.
The country has also blocked social media sites and set visa fees for journalists as high as A$8,000 ($5,979; £3,883).
Ms Bishop on Friday urged Nauru to give its citizens "natural justice", Australian Broadcasting Corp (ABC) reported.
"We are concerned, that's why I'm raising it," she told the ABC on Friday.
"I know my colleague, Murray McCully, the foreign minister of New Zealand, has raised it because New Zealand funds the Nauru justice system," she said.
"We urge there to be an adherence to the rule of law, that their justice system operates properly, that people are not denied natural justice, that they're given an opportunity to present their case.
"I've had one confidential discussion with the president [Baron Waqa] and I'll be having another one today."
'No turmoil'In a statement reporting by Australian media, Nauru Justice Minister David Adeang said: "Contrary to reports in some sections of the media, there is certainly no breakdown in democracy or any other turmoil in Nauru."
"We are merely upholding the rule of law and those who break the rules will be arrested."
Australia sends about A$26m in aid a year to Nauru on top of funds for running the detention facility, which was opened in 2001.
Australia has a policy of mandatory detention for any asylum seekers caught trying to reach its shores.
Those found to be genuine refugees are resettled in other countries such as Cambodia.
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