Auckland will move to alert level 1 on Wednesday at 11.59pm, Prime Minister Jacinda Ardern says.
That means no limits on gatherings and the removal of social distancing requirements in restaurants and bars.
Masks are not required on public transport in alert level 1 but Ardern urged people to keep being vigilant - by washing hands, staying home if sick, scanning QR codes and getting tested if even feeling slightly sick.
"I don't want anyone to think that because we're at level 1 that Covid is now absent from New Zealand."
Safety measures like staying home when sick were "acts of public service", she said.
What led to the PM's decision on the move
Ardern said Cabinet met via Zoom today to review Auckland's alert level.
The Auckland cluster was New Zealand's biggest but all signs pointed to it being under control, she said.
There had been no new cases in the cluster for 10 days, and only one case in the last two weeks.
Just five people from the cluster are yet to recover from Covid-19.
There was now a 95 per cent chance that the cluster had been eliminated, according to new modelling by Te Pūnaha Matahini.
A separate group of cases - which was linked to a person who tested negative twice in isolation before testing positive - had shown how new cases could be identified, traced, tested, and contained without any change to alert levels or restrictions, Ardern said.
It had now been 12 days since any cases associated with that cluster, and with only one remaining positive case, the Government was confident that it was also contained.
Ardern said the resurgence of the virus was not New Zealand's only worry - the resurgence of complacency was also a problem.
QR scans had halved from their peak at the height of the current outbreak, she said.
Businesses still need to display QR codes at Level 1, she said.
It was also important not to get complacent on testing, Ardern said.
The low rates of testing in July, during the freedoms of Level 1, might be part of the reason that the outbreak was not picked up sooner, she said.
Level 1 required everyone to be vigilant and play their part.
She reiterated that anyone who felt sick should stay home. And people should keep scanning into places via the contact tracing app.
Ardern said some progress had been made in alternative Covid testing methods, including a saliva test which could make a difference at the border.
Many countries were looking at a form of surveillance and screening, but New Zealand needed very a high sensitivity of testing because of its elimination approach.
'A test of our plan'
Ardern said a lot was at stake with the resurgence of Covid-19 in Auckland.
"It was a test of our plan," she said.
New Zealand again responded well, she said.
"I know for many, this one has felt harder, especially for Aucklanders.
"Despite that, Aucklanders and New Zealanders stuck to the plan that has worked twice now and beat the virus again.
"Our team of five million, a little more battle-weary this time, did what our national teams do so often: we put our heads down and we got on with it."
She pointed to soaring cases overseas, including 12,000 new cases in the UK on Saturday and restrictions of there of gatherings up to six people.
These restrictions overseas were largely absent in New Zealand, and the economy was getting back to full capacity, she said.
Building consents, exports, card spending and traffic showed the economy was ticking along well, she said.
However, recent months had been very challenging, especially for the arts, retail, hospitality and tourism, she said.
New Zealand was still well-placed compared to other countries in terms of Covid restrictions.
Auckland mayor's alert level 1 message
Auckland Mayor Phil Goff has welcomed the Government's decision.
"Aucklanders have for the second time united to successfully halt community transmission of Covid-19 and I want to thank them for the sacrifices they have made to achieve this result," he said.
"It's great news for businesses, which will be able to trade again as normal under Level 1, providing a welcome boost for the economy. It's also great news for Aucklanders who can enjoy gathering with friends and family and attending major events as normal," Goff said.
"I encourage everyone to get out and support local business, cafés and restaurants and make the most of everything our beautiful city has to offer.
"The Elemental Festival is in full swing, with more than 40 events across Auckland, and the Diwali Festival is set to light up the region from 27 October to 14 November.
One new case in managed isolation today
Yesterday she said the earliest Auckland could move to level 1 - if Cabinet deemed it safe enough - would be Wednesday because the law requires the necessary Government order to be gazetted for at least 48 hours before it comes into force.
It has just been revealed that there is only one Covid case in New Zealand today - in managed isolation.
Today marks 11 days since the last case in the community.
This morning public health experts, including Otago University epidemiologist Professor Michael Baker, said it was safe to ease restrictions but warned against complacency.
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Baker has advocated a level 1.5, with mask use on public transport and aircraft, and for more stringent border measures including a pre-departure period of quarantine and a negative test for travellers coming to New Zealand from high-risk countries.
Last week the Ministry of Health asked travellers to refrain from partying and to stay at home for the fortnight before their flight back to New Zealand.
This morning Cabinet will have considered several factors including the latest cases, the nature of those cases, the efficacy of contact tracing, the strength of border controls and the ability keep testing numbers high.
It will have also considered the impact on the economy and the public appetite for ongoing compliance.
On Saturday, University of Auckland Professor Shaun Hendy told the Herald that there was a more than 95 per cent chance that Covid-19 was eliminated.
There hasn't been a case outside of managed isolation or quarantine facilities since September 24, and there hasn't been a case in the community who wasn't already isolating since September 20.
Yesterday there were five new cases - all in managed isolation. Of the 41 active cases, seven were community cases.
No one was in hospital with Covid-19.
It has been almost eight weeks since the current outbreak was first detected, and the cluster has since grown to 179 cases - the country's biggest.
The source of the cluster is still unknown.
There have been a number of cases outside the cluster too, including two families that were infected after a man who didn't know he had Covid-19 boarded a charter flight from Christchurch to Auckland.
The outbreak also saw suspected transmission from surfaces, including from an elevator in Rydges Hotel and a common rubbish bin in the Crowne Plaza in Christchurch.