The Office of Film and Literature Classification said in a statement it had outlawed sales of the game by stripping it of its official classification after learning of the explicit content.
"Revocation of a classification means the computer game cannot be legally sold, hired, advertised or exhibited in Australia from the date the decision is made," the statement said.
"Businesses that sell or hire computer games should remove existing stocks of this game from their shelves immediately," said Des Clark, director of the government-funded classification board.
The game involves a main character seeking bloody vengeance on gang-filled streets, firing automatic weapons and picking up women along the way.
After downloading and installing a modification to the game — one of many "mods" available on Web sites maintained by video game enthusiasts — a new world opens up in which the girlfriends appear nude and engage in explicit sex acts, according to the modification's author.
The classification board in October 2004 gave the game a MA15+ rating, meaning it could be sold only to people aged over age 15, and warned that it contained "medium level animated violence, medium level coarse language."
On Friday, Clark advised parents to be on the alert for their children accessing the explicit scenes.
"Parents are strongly advised to exercise caution in allowing children continued access to the game," he said — particularly if they have access to the Internet modification.