New Plymouth District Council has agreed in principal to hand over the Nga Motu-Sugar Loaf Islands to Maori for treaty settlements.
Treaty of Waitangi Negotiations Minister Christopher Finlayson asked the District Council and the Taranaki Regional Council to consider handing over ownership of the islands to two iwi to be used as part of their Treaty settlement deals.
The small islands are considered sacred places by Te Atiawa and Taranaki iwi.
The District Council agreed in principal to the transfer at a meeting on Tuesday night and will consult with the public on the matter.
Under Mr Finlayson's proposal, the Department of Conservation will continue looking after the Sugar Loaf Islands' marine protected area and the public's use of the area will not change.
The iwi must also agree to each other's interests in the islands, which they historically fought over.