The new feature is already available in Australia and will be added to UK and Hong Kong clients later this year.
In a statement, the company said the integration would help SMBs connect multi-currency financial transactions in Airwallex to Xero.
SMBs would also be able to see their Airwallex funds in Xero's interface.
"This is even more imperative when it concerns their multi-currency financial reporting as there is no room for errors.
“An integration with Xero is one of the most requested integrations from our customers. We have been listening and are delighted to be able to offer this to our Australian customers from today, with a wider international rollout planned across 2020.
"This is the start of a series of capabilities that we plan to introduce with Xero to improve the way small businesses manage their finances across platforms."
Xero financial industry director Ian Boyd said: “As more small businesses enter overseas markets, it’s important that their multi-currency payments flow seamlessly in Xero and are automatically reconciled.
"This integration with Airwallex will ensure our mutual customers spend less time on administrative tasks and more on what’s important to them – running their business.”
Right now, Airwallex allows SMBs to access interbank foreign exchange rates on international payments and transactions. They can also open accounts in the US, UK and EU.