The Akaroa Marine Reserve proposal will now go back to the minister.
Green Party oceans spokesman Gareth Hughes urged Conservation Minister Kate Wilkinson to approve the application.
"The Government needs to get serious about protecting our marine environment and threatened species like Hectors and Maui's dolphins by increasing the miniscule amount of New Zealand waters that are protected," said Mr Hughes.
"I congratulate the Akaroa Marine Protection Society and local community who have been fighting for this reserve since 1995.
"The quashing ... of the minister's decision to decline the ...application shows that her decision was unsound."
Ms Wilkinson said she hadn't had a chance to read the judgement.
"I will have to see what the judge has to say, won't I. I go on advice. I made the decision using the processes that are in place under the Marine Reserves Act. The judge has come to a different conclusion. I have to study it."
Society secretary Kathleen Reid was delighted with the High Court decision.
"It's been a long campaign, and it's not all over yet, but it's excellent news for us.
"The minister now has to look at the decision again, and hopefully this time she'll apply a more positive test to it.
"The legal test has now been spelled out by the courts. The minister took quite a narrow view and is now required to look at the big picture and look at all the benefits of a marine reserve.
"It was very disappointing when she turned it down on the basis of adverse affects for recreational fishers.
"It was also the first time that a conservation minister has declined a marine reserve outright, so we did feel for the sake of future applications that this needed to be tested in the courts. So we're very pleased that the judge has come out with the view that a wider approach needs to be applied, not the narrow view that the minister took. It's a landmark case really.
"We have maintained for many years that the harbour has become severely depleted and degraded. We can see that it's happened in our own lifetime and it's been such a concern to us that we first got interested in the idea of a marine reserve way back in 1989.
"It's well documented how successful marine reserves can be. It's a very heavily fished part of New Zealand and also has a very high number of visitors, especially now with the cruise ships coming in because of the damage to Lyttelton. A lot of those people like going on harbour cruises, so there is a commercial element here as well.
"It's good for the economy, good for biodiversity and good for fish stocks, so it was very disappointing when the minister didn't see it that way."
