Olyroos coach Graham Arnold has challenged Australia's young footballers to show the world's best how good they are at this year's Olympics.

Australia were handed a tough draw for their first Olympic men's football tournament since 2008 on Wednesday, pitted against two-time gold medallists Argentina, European powerhouse Spain and African giants Egypt.

Arnold says the draw is a "group of dreams" and the prospect of facing global superstars such as Lionel Messi, Sergio Ramos and Mo Salah should be viewed by his players as a potentially life-changing moment.

"This is what you dream about in world football, and these type of tournaments," Arnold said.

"The players, this is what they want. This is what they expect to play at these major tournaments.

"I couldn't be happier with the draw, it's a great opportunity for the younger players to really put themselves on the stage and really show what they've got."

In January Arnold predicted his team would become Australia's first Olympic football medallists and it's a belief that hasn't changed despite the imposing draw.

He says the players at his disposal have improved since Australia qualified for the Games at the Asian under-23 championships in January 2020 while talent such as Central Coast phenomenon Alou Kuol have emerged over the past few months in the A-League.

"I've driven that mentality into these boys since I took over the Olyroos in 2018 ... we didn't talk about just qualifying for the Olympics, we talked about being the first men's football team in Australian history of getting a medal," he said.

"Our ambitions haven't changed. These players ... as individuals, it can change your whole life.

"That's a great thing for these players to be able to go and play in this tournament and our expectations have not changed one bit. If anything, they've got higher."

Arnold says he expects to select a handful of Olyroos in an extended Socceroos squad for upcoming World Cup qualifiers in June.

Other Olympic hopefuls will be part of an Australian under-23 squad at a friendly tournament in Toulon, France at the same time as the Socceroos matches.

Arnold will select his 18-player squad for the games on June 28 with the opening match of the Games in Sapporo against Argentina on July 22.