"My challenge to all Ngapuhi today is this: put aside your differences", Mr Key said following this morning's dawn service at Waitangi.
"The Crown is ready and willing to negotiate with whovever you choose as your representatives."
Mr Key said he was keen to see a deal struck this year.
"If that can be done I am prepared to look at some form of payment on account to incentivise people to act in a positive and progressive manner."
Speaking to reporters after Mr Key speech, Mr Tau, the chairman of Te Runanga a Iwi o Ngapuhi said the offer wasn't solicited but it was welcome.
"Everybody knows that iwi when they go along the settlement route they have to pay for their things themselves. It's cost us $3.5 million to get where we are today. We've had no assistance and But Mr Tau said the payment was unlikely to speed up Ngapuhi's settlement process.
"The incentive for us is the drive to get our iwi grievances behind us and build an economic base for Ngapuhi."
Responding to the figures offered by Mr Tau, Mr Key said: "You've got to dream big but it doesn't mean we'll be writing a cheque for that amount".
Nevertheless,"It's going to be a big deal" he said.
Treaty Negotiations Minister Chris Finlayson made the point the Crown had not yet recognised a properly-mandated Ngapuhi entity to conduct formal negotiations with.
The Government expects to make a decision on whether to recognise the runanga's Tuhoronuku mandate within weeks.
However opposition to Mr Tau's group negotiating of behalf of all Ngapuhi's hapu was clearly evident in the form of protests at Te Tii Marae yesterday.
"It's the size of that protest that matters'', Mr Tau said, "and we think that is insignificant."
But Crown recognition of the Tuhoronuku mandate is likely to trigger a Waitangi Tribunal claim by rival groups while the runanga is likely to also launch a claim of its own if it does receive recognition which could derail Mr Key's wish for swift progress.
Waitangi buzzing with big crowds despite wind and rain
Wet and blustery weather has failed to keep the crowds away from Waitangi with hundreds pouring on to the Treaty Grounds.
The grounds and its surrounds are buzzing with people of all ethnicities enjoying the festivities on what marks 174 years since the Treaty of Waitangi was signed.
Earlier this morning a number of waka departed from the Te Tii shoreline in front of an appreciative audience with a group of about 20 elderly pakeha performing a haka for the kai hoe (paddlers).
A group opposed to deep sea mining in Te Reinga Basin completed their hikoi to the upper marae with a powhiri outside te whare runanga at Waitangi this afternoon with a peaceful but spirited demonstration.
Group spokesman Joel Bristow, who yesterday received an offer from Prime Minister John Key to go to Wellington to discuss his concerns about deep sea mining, said he was considering the invitation.
"We were here to deliver a message and not cause distraction as John Key initially said."
"It was about delivering a message to our people that is we are trying to offer alternatives to our economy and environment."
Also at the upper marae at Waitangi were Ian and Katherine Kerr with their son Jake.
The family from near Kerikeri said Waitangi was a "quintessential New Zealand experience" that Kiwis should participate in before heading overseas.
"It's a bit quieter this year, we were hoping to get warmed up by a bit of hot korero actually," said Mr Kerr.
"I get tired of people saying on talkback that it's bad here, these people need to get here and get into it and see what it's all about."
Dozens more are enjoying the stalls below the golf course at Waitangi.
"It's been an awesome day," said Megan Vercoe, 16 of Ruakaka who has come to Waitangi for the festivities for the first time.
"I think all New Zealanders should come here and see it for themselves, it's a special experience."
Hundreds at the dawn service
Rain didn't deter the hundreds who attended the dawn service at the Treaty grounds at Waitangi this morning.
The service, overseen by Bishop Kito Pikaahu, began shortly after 5am today after National and Labour party ministers were again led on to the marae by veteran Maori activist Titewhai Harawira.
Prime Minister John Key asked those gathered to pray for those who have passed, making special mention of former Labour MP Parekura Horomia, who died last year.
Mr Key said Mr Horomia would be remembered "for the beaming smile and the beauty of the human spirit he had".
Labour leader David Cunliffe began his prayer asking that God bless "the young, the old, the wet and the dry" which earned chuckles from the dozens standing in the rain outside the whare.
The celebrations today mark 174 years since the treaty was signed.
Mana Party leader Hone Harawira was among several who paid tribute to former South African leader Nelson Mandela.
"After 27 years in jail he had a smile on his face and love in his heart."
"That's bigger than I could ever be."
Mr Mandela was also remembered by the Maori Council's Maanu Paul.
While Green Party Co-leader Metiria Turei did not attend the service, her MP Denise Roche offered a prayer with a strong environmental and social message.
"We pray for our precious resources of water and we pray we may be able to swim in them safely in the future.''
Ms Roche also prayed for "more ways to farm humanely and sustainably'' and for "flora and fauna uniquely beautiful, much of it near extinction''.
She also prayed for the rich and poor, and "to reduce the gap between them''.
Mr Key later criticised the "political element'' in Ms Roche's prayer.
"I actually don't think that's the right forum for a political discourse I think it's a place where we come together, politics is parked up at the door as I think one or two of the religious leaders said.''
NZ First Leader Winston Peters was called to speak by Bishop Pikaahu but was absent. He later said he had not received an invitation to speak at the service.
