New Zealand Prime Minister Chris Hipkins has hailed Australia's embrace of Kiwis as "historic" after about 400,000 were offered a pathway to citizenship.
The contingent of New Zealand residents living in Australia will be eligible to become Australian citizens in July following sweeping changes unveiled by Anthony Albanese.
"This is the biggest improvement in the rights of New Zealanders living in Australia in a generation," Mr Hipkins said.
With citizenship, New Zealanders in Australia can access rights they held prior to a 2001 change by John Howard's government.
That includes access to key welfare benefits, student loans, disability support, to public housing, to work for the public service or to serve in the armed forces and to vote.
Australians living in New Zealand enjoy all of those benefits, some after waiting times.
The reversion to a reciprocal citizenship arrangements comes after decades of campaigning by Kiwi governments and politicians.
Then Labour opposition leader Andrew Little travelled to Canberra in 2015 to brief an Australian Senate committee on the hardship faced by New Zealanders without access to a support net.
The issue was returned to the top of the trans-Tasman agenda in Sydney last June by Jacinda Ardern when she became the first world leader to visit Mr Albanese after his election win.
Shortly after, the pair announced the review of citizenship that has led to this weekend's announcement.
"Successive New Zealand prime ministers have advocated for this change for two decades," Mr Hipkins said.
"Today's announcement brings our nations closer together. It underscores the strength and breadth of the bonds between our countries.
"These changes will make a real and meaningful difference to the lives of many New Zealanders and their children by giving those who decide to take up Australian citizenship similar rights to Australians living in New Zealand."
Ms Ardern told AAP in December she considered it a duty both to care for New Zealanders based overseas and maintain reciprocal relationships.
"We look after our people no matter where they are contributing in the world," she said.
Home Affairs Minister Clare O'Neil said on Saturday Kiwis were "more like family to us as Australians than friends".
"Yet the law has said that when Kiwis migrate to Australia, they are essentially treated worse and differently than other migrants," she told ABC TV.
The scenario was one that failed to "reflect that beautiful close friendship that we have with New Zealand", she said.
Under the changes, children of New Zealanders born in Australia will also become citizens at birth, rather than waiting until they are 10.
Mr Albanese said the changes were "consistent with our ambition to build a fairer, better managed and more inclusive migration system".
"Australia and New Zealand have a deep friendship, which has been forged through our history, shared values and common outlook," he said.
"I am proud to offer the benefits that citizenship provides."
The shift has delighted advocates including Joanne Cox, who leads Oz Kiwi, a volunteer group founded a decade ago to campaign against the existing arrangements.
"It's very emotional. It's been a slog," she told AAP, saying she broke down crying when she learned the news.
"It's been demoralising. It's been frustrating. There have been tears and anger over the years and some absolute horror stories along the way.
"But this, it's like a fairy tale. The changes they are bringing in is enormous and the impact they will have on so many people is enormous."
Mr Albanese and Mr Hipkins will meet in Brisbane this weekend.
