Whenuapai will remain an active Air Force base, Defence Minister Wayne Mapp has confirmed.
The Cabinet has also approved a three-year, $60 million programme to make it fully operational again.
Whenuapai on Auckland's North Shore is one of two Air Force bases in New Zealand. The other is at Ohakea in Manawatu.
Dr Mapp says the decision was made to protect the 1,000 jobs at Whenuapai and ensure greater flexibility for the Air Force. He says the base will be used only for defence purposes.
The Whenuapai Air Base Action group says it is relieved at the decision. The group of about 1500 residents has been campaigning against the idea of turning the air base into a commercial airport.
Group president Russell Stewart says they accept the Air Force because it has been in the area for a long time.
But most residents bought their houses with no idea there may be an airport built in the area, which would raise issues of pollution, noise and safety.
However, an infrastructure investment company says the decision does not rule out the possibility of the base being used commercially in the future.
Infratil runs Wellington Airport and has in recent years been working with Waitakere City Council on a proposal to convert Whenuapai into a commercial site to supplement Auckland Airport.
Infratil executive Tim Brown believes it could also be possible for aero clubs and training facilities to use Whenuapai in future.