Wellington City Council has signed off on the transfer of Taputeranga Island, off the south coast, to Ngati Toa Rangatira.
The tribe is to receive the council-owned island as part of the Tau Ihu Claims Settlement Bill, which is in the select committee stage.
Under the bill, the council will get $700,000 for the island, which will become a reserve under iwi ownership.
Wellington Mayor Celia Wade-Brown performed a mihi and waiata to Te Runanga o Ngati Toa chairman Taku Parai, before the council unanimously supported the move.
She said she hopes the council and iwi will continue on their path of mutual respect and love for the island.
Te Atiawa is contesting Ngati Toa's claim to Taputeranga, and presented a submission on the bill to the Maori Affairs Select Committee last week.