The report from Makassar by Detikcom online service said McCarthy was attacked by angry East Timorese during a visit to inaugurate a representative office of the Australian-Indonesian insurance company, MLC Life.
According to Detikom, local reporters were interviewing McCarthy at the office's parking lot when a group of about 20 East Timorese refugees arrived on the scene, When they saw him they immediately attacked him, kicking and beating him.
In Jakarta, Indonesian Defence Minister Muhammad Mahfud expressed concern over the reported incident and urged police authorities to take legal action against any people who had attacked the envoy, the official Antara news agency said.
The agency quoted Mahfud as saying that if the incident proved to be true, whoever beat up the ambassador must be arrested.
The reason for the attack was not known and there was no immediate comment from the Australian embassy.
Mahfud emphasised that the incident would not help resolve the problems of the East Timorese refugees.
Relations between Australia and Indonesia have been strained since Australian troops led international peacekeepers into East Timor to end a bloody backlash against the province's vote for independence from Indonesia.
Armed pro-Jakarta militias, backed by elements within the Indonesian military, were blamed for widespread intimidation before the August 1999 United Nations-organised independence vote and went on a spree of killing and destruction in which hundreds of people were killed.
McCarthy, in an interview published Monday in the Sydney Morning Herald newspaper, accused Indonesian military leaders of having "broad knowledge" of atrocities committed last year in East Timor.
In Jakarta, the former armed forces commander, retired General Wiranto, sharply criticised McCarthy's comment and urged foreigners to stop interfering in Indonesia's domestic affairs.
"If someone has an opinion and an interpretation, please deliver them officially to the Indonesian government," Wiranto was quoted as saying by the Indonesian Observer daily.
(la/dpa)