The powerful 22-year-old tighthead, who stands 188cm tall and weighs in at 126kg, had been offered a lucrative contract by Ulster with a view to playing for Ireland, who he is eligible to represent through his mother.
De Lutiis said his family and the prospect of potentially playing for Australia at a home World Cup next year had been big factors in his decision.
"I had a lot to weigh up. I spent a good week or two going through it and it was a bit stressful," De Lutiis said in a statement.
"I definitely feel like a weight has been lifted with this decision. Now I'm locked in, I can focus on the next three years in Australia."
Although he has yet to be capped by Australia, De Lutiis' promise has been recognised by his inclusion in two training camps with the Wallabies.
De Lutiis is currently sidelined by a hamstring injury but should play a part in the latter end of the Super Rugby Pacific campaign.
"Despite challenges with injury, he's a committed professional and he's only going to get better and better," said Reds coach Les Kiss, who is taking over from Joe Schmidt at the Wallabies after the July tests.
"He's an important and respected figure in the Reds locker room."