New Plymouth District Council has agreed to hand over the Sugar Loaf Islands to the Crown for use in two Treaty settlements.
The move follows a decision by Taranaki Regional Council to hand over its share of the protected islandsoff the coast of New Plymouth.
Members of Taranaki and Te Atiawa iwi lived there at various times and the islands are home to several archaeological sites and two burial grounds.
The islands are valued at nearly $240,000 but the district council agreed it would not seek compensation, given it paid nothing for them and held them at no cost.
A Taranaki iwi representative, Tokatumoana Walden, says the return of the islands in name only will restore the mana of the people who once lived there.
The Department of Conservation will continue to manage the islands.