The move significantly changes the Government's policy of dealing only with large natural groupings - a policy that has led to one group negotiating while others sit on the sidelines.
Collective spokesman Tamati Kruger said that point alone was a crucial development, because individual iwi could not directly negotiate with the Crown and cut out other tribes' interests.
"From a Maori point of view it tests the integrity of every iwi. If I'm in direct negotiations with the Crown, well, I don't really have to worry about any other iwi. I'm focused on my iwi," Mr Kruger said.
"In this regard our relationships come to the fore, our history together, our history of collaboration and co-operation, our history of contest and competition.
"It will make or break their relationships."
Dr Cullen would not be drawn on what the forest was worth, saying that was part of the negotiations.
Once allocation issues are decided, talks will begin on commercial redress.
Iwi will receive Crown forest land and the accumulated rentals held by the Crown Forestry Rental Trust.
Other settlement components, such as an apology, acknowledgments of Treaty breaches and cultural redress packages will be negotiated separately later.
Asked about the timeframe for the negotiations, Dr Cullen said: "I am very hopeful that we can get the main outlines of the agreement before the elections. That certainly was the expectation of everyone that was in this room. We are talking a matter of weeks to a small number of months - not months to a small number of years."
Mr Kruger said the hope was that after the settlement, the estate would be managed collectively.
It made no sense for iwi to walk away once the deed was done.
Parallel to the process, Ngati Makino and Waitaha will also start settlement negotiations.
Dr Cullen said it was important to note that there was more than enough room for other iwi to come on board if they decided to do so.
He said Te Pumautanga o Te Arawa, whose Kaingaroa deal last year caused alarm among iwi yet to settle, had agreed to let their deal wait to pass through legislation while the collective negotiates.
Te Pumautanga have been assured that their deal will not be adversely affected by the collective deal.
LANDMARK NEGOTIATIONS
What's being negotiated?
The 189,000ha Kaingaroa Forest in the central North Island.
Who is it between?
The Crown and the Central North Island collective consisting of Ngati Tuwharetoa, Ngati Whakaue, Ngai Tuhoe, Ngati Rangitihi and Ngati Whare, representing 100,000 Maori.
Who are the negotiators?
Ngati Tuwharetoa paramount chief Tumu te Heuheu and Treaty Negotiations Minister Michael Cullen.
Why now?
The terms of agreement were signed yesterday, after 18 years and $30 million spent on talks.
What are previous benchmark settlements?
Tainui and Ngai Tahu each received $170 million.
