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The Te Awa Tupua (Whanganui River Claims Settlement) Bill was passed as part of the government's program to settle claims for historic injustices perpetrated against the indigenous Maori people.
The legislation would establish a new legal framework for the Whanganui River, known in Maori as Te Awa Tupua, which recognized the river as an indivisible and living whole from the mountains to the sea, said Treaty of Waitangi Negotiations Minister Christopher Finlayson.
Te Awa Tupua would have its own legal identity with all the corresponding rights, duties and liabilities of a legal person.
""The approach of granting legal personality to a river is unique,"" Finlayson said in a statement.
""It responds to the view of the iwi (Maori tribe) of the Whanganui River, which has long recognized Te Awa Tupua through its traditions, customs and practise,"" he said.
""This legislation recognises the deep spiritual connection between the Whanganui Iwi and its ancestral river and creates a strong platform for the future of Whanganui River.""
The Whanganui Iwi had fought for recognition of its relationship with the Whanganui River since the 1870s.
""Today brings the longest running litigation in New Zealand's history to an end,"" said Finlayson.
The river, New Zealand's third longest, is 290 km long and flows from Mount Tongariro, in the central North Island, to the Tasman Sea.
The Treaty of Waitangi was signed by Maori chieftains and the British Crown in 1840 and guaranteed the Maori certain rights and customary privileges after New Zealand became a British colony.
But Maori were forced off their land in a series of later confiscations and wars that have since been recognized as violations of the treaty.
Over the last two decades the government has been settling claims with iwi around the country, but the Whanganui settlement was ""innovative,"" said Finlayson.
Finlayson told Radio New Zealand that the new law would work like a charitable trust or an incorporated society, with trustees for the river legally required to act in its best interest.
""There some precedents for it overseas, there had been a lot of talk that this is actually a really good way of ensuring that the particular resource is able to have representative to address the kind of environmental degradation that so many natural resources suffer from,"" he said in the report.
The law also enacted compensation of 80 million NZ dollars (55.52 million U.S. dollars) for the iwi and a contribution of 1 million NZ dollars (694,000 U.S. dollars) towards ""establishing a legal framework for the river.""