This paper explores the efficacy of online e-learning environments for developing students' intercultural competence (IC) in the context of Australian higher education. It begins by defining the key attributes and prescriptors of IC, and argues that Taylor's theory of perspective transformation (Adult Educ Quart 44:154-174, Int J Intercult Rel 18(30):389-408) is the most plausible explanation for why and how people become interculturally competent. E-learning is put forward as a platform for developing students' IC, due to its interactive and multimodal approach to learning. Last, the paper outlines several strategies for developing students' IC in an e-learning context. We recommend a bi-directional approach whereby students and lecturers work to become more knowledgeable and flexible towards other cultures. The findings of this paper will contribute to existing literature on IC by demonstrating how online e-learning environments can help to develop positive attributes of flexibility, curiosity, openness and acceptance of diversity in students. Although the paper uses Australian higher education as its example, the findings should be applicable to higher education in a global arena.