The koala, named Lewis, was struggling to escape the fire when Toni Doherty saw him from her car. She took the shirt off her back and used it to bundle him up and take him to safety.
WATCH: Video shows koala being rescued from wildfire
Doherty told local broadcaster Network Nine that it was "just natural instinct" for her to rush to the koala's aid, wrapping the animal in her shirt and pouring water over it to help soothe his burns.
Unfortunately his injuries were too severe and he had to be euthanized, according to a Facebook post by The Port Macquarie Koala Hospital on Monday.
"We placed him under general anesthesia this morning to assess his burns injuries and change the bandages," the hospital said in their Facebook post. "We recently posted that "burns injuries can get worse before they get better". In Ellenborough Lewis's case, the burns did get worse, and unfortunately would not have gotten better. The Koala Hospital's number one goal is animal welfare, so it was on those grounds that this decision was made."
The hospital is full of injured koalas and continues to rescue and treat the animals after the fires broke out in late October.
The fate of Australia's koala population is hanging in the balance as deadly fires continue to rage across the country.
RELATED: Fate of Australian koala population uncertain as bushfires ravage country
The chairman of the Australia Koala Foundation estimates that more than 1,000 koalas have been killed in the fires and over 80% of the species' habitat has been destroyed. Recent drought-driven bushfires and deforestation have caused koala population numbers to decline.
Many are urging the Australian government to pass the Koala Protection Act that was written in 2016. Koala lovers around the world have also joined the cause, with one hospital raising more than $1.5 million to care for the koalas.