The proposal could see new bilingual signage pop up over the city with interpretive panels and information on reserves, plus changes to websites and document translations.
There were also benefits for the promotion of Maori culture and language and tourism and tourists, the council heard.
Earlier, Mrs Chadwick said on the international stage, Rotorua was seen as the "heartland of Maoridom".
She said this decision would be the "greatest achievement that Te Tatau o Te Arawa Board would have gifted to the district".
Councillor Tania Tapsell shared her excitement, while acknowledging the late Hawea Vercoe who had "planted the seed" with putting kura on school buses.
She said she was surprised Rotorua was not already officially bilingual.
"Together [Maori and Pakeha] have built this township into something quite wonderful."
However, it was not all plain sailing with councillors Peter Bentley and Rob Kent questioning both the procedure and possible funding for the project.
Mr Bentley said he did not agree with any ratepayer money being used for the project.
But, they were told this was just the first step and there had been no funding decisions made and the council would apply for some of Te Puni Kokiri's new $21 million Maori Language Development Fund.
Councillor Trevor Maxwell said the move could also be useful for English speakers wanting to know what all the Maori place names meant and what their history was.
Mr Flavell told the Rotorua Daily Post it was great news for the Maori language.
"This is exactly the kind of community-led initiative that I support and it will help create the right environment for the further use of te reo Maori," he said.
"The goals of Te Ture mo te Reo Maori - the new Maori Language Act - passed last year include whanau, hapu, iwi, communities and government working towards making the language a living language and this is just what Rotorua is doing.
"I hope it provides the catalyst for others to follow suit.
"The council is to be congratulated for its foresight and support of te reo," he said.
Rotorua cannot claim to be the first district in New Zealand to become officially bilingual after the Otaki and Wairoa districts had already made the move, but could lay claim to being the first bilingual city in the country.
What could a bilingual Rotorua look like?
- Bilingual public signage
- Interpretive panels and information on reserves
- Websites and document translations
- Better promotion of Maori culture and language
- Benefits for tourism and tourists
