NSW parliament approved plans for the creation of a Great Koala National Park - a move first publicly backed by the state's Labor party in 2015.
The park will span 476,000 hectares on NSW's mid-north coast in the hopes of protecting the more than 12,000 koalas that live in the region.
"Good for the koalas and the trees they live in, good for the greater gliders and the 100 other threatened species that rely upon them, an iconic and must-visit park now and for future generations," Environment Minister Penny Sharpe said.
Greens MP Sue Higginson, a passionate advocate, said the work of protecting native forests must continue.
"This is an extraordinary achievement and a historic victory for our precious native forests, our threatened species and the communities that have fought for more than a decade to see this park become a reality," she said.
Conservation groups celebrated the news, with WWF Australia thanking the government for delivering on its promise.
"This is conservation at the scale nature needs," chief executive Dermot O'Gorman said.
"Protecting hundreds of thousands of hectares of connected habitat will give koalas and other endangered species room to recover and adapt as the climate changes."
Calling the bill's passage a milestone for koalas, Clancy Barnard, Senior Forest Campaigner for Nature Conservation Council NSW, said more could be done to preserve habitats.
"Protecting koalas means both protecting the forests they live in and protecting the climate they depend on. That's why the government's recent decisions to expand coal mining are so disappointing," he said.
The North Coast Environment Council expressed concern about some areas being earmarked for recreational use.
The park's creation was contingent upon the registration of a controversial carbon credits scheme, known as the Improved Native Forest Management (INFM) method.
Created by the Minns Labor government and supported by the federal Labor government, the scheme allows states to earn millions of dollars by opting not to log public native forests that would otherwise be used for commercial forestry.
The scheme caused a split within the Greens, with former leaders Bob Brown and Christine Milne publicly opposing the proposal.
After the Senate voted to preserve the INFM framework last month, the Clean Energy Regulator announced on Thursday that it had registered the park as the first project to make use of the method.
Despite this, the Bob Brown Foundation applauded the legislation's passing, saying it will protect "176,000 hectares of native forest from logging".
"While clawing any forest from the jaws of loggers is a win, many vital forests have been left out," its statement read.
"The fight goes on to achieve a truly world-class park, not a patchwork collection of different reserves, allowing for car racing, logging and quad biking."
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