Police said Monday the skeleton of the psittacosaurus sinensis was taken from the Newcastle Regional Museum, about 120 kilometres (195 miles) north of Sydney, on Saturday night.
Museum director Gavin Fry said the 60 centimetre (24 inch) tall fossil, with a parrot-like beak, was one of only six of its type in the world and was a direct predecessor of the giant triceratops herbivore.
"It's not of great monetary value, tens of thousands of dollars rather than millions, but it's scientific value is undisputed," Fry told AFP.
He said the theft from an alarmed exhibition gallery was embarrassing for the museum because the skeleton was part of an exhibition of dinosaur remains on loan from China.