France has accused Australia and the United States of lying in a crisis over a security pact that saw Canberra scrap a contract to buy French submarines in favour of American vessels.

"There has been lying, duplicity, a major breach of trust and contempt. This will not do," French Foreign Minister Jean-Yves Le Drian told France 2 television.

He said a "serious crisis" was now in progress between the allies after Paris recalled its ambassadors to Canberra and Washington.

He also lashed out at the "permanent opportunism" of the British government, which he dismissed as the "third wheel" in the security pact with Australia and the United States.

NATO would have to take account of what has happened as it reconsiders future strategy, he added.

Earlier, France's ambassador in Canberra - who is now set to return home - said Australia had made a "huge" diplomatic error.

"I think this has been a huge mistake, a very, very bad handling of the partnership – because it wasn't a contract, it was a partnership that was supposed to be based on trust, mutual understanding and sincerity," Ambassador Jean-Pierre Thebault told journalists.

Australia said on Thursday it would scrap the deal signed in 2016 for France's Naval Group to build a fleet of conventional submarines and would instead build at least eight nuclear-powered submarines with US and British technology after striking a trilateral security partnership.

France called the cancellation of the deal - valued at $40 billion in 2016 and reckoned to be worth a lot more today - a stab in the back and recalled its ambassadors from the United States and Australia.

"I would like to run into a time machine, if possible, and be in a situation where we don't end up in such an incredible, clumsy, inadequate un-Australian situation," Mr Thebault said.

"I'm very sad to be forced to leave, albeit there needs to be some reassessment to be made."

Australia said it regretted the recall of the French ambassador, and that it valued the relationship with France and would keep engaging with Paris on other issues.

"Australia understands France's deep disappointment with our decision, which was taken in accordance with our clear and communicated national security interests," a spokesperson for Foreign Affairs Minister Marise Payne said in a statement.

US State Department spokesperson Ned Price said that France was a 'vital ally' and that the United States would be engaged in coming days to resolve the differences.

The row marks the lowest point in relations between Australia and France since 1995, when Canberra protested France's decision to resume nuclear testing in the South Pacific and recalled its ambassador for consultations.