Against were councillors Mike McVicker, Glenys Searancke, Rob Kent and Peter Bentley - who are members of the Rotorua Pro-Democracy Society - and Mark Gould.
More than 250 people attended the meeting, with 130 in the council chamber and others watching from adjacent committee rooms, where television screens were set up.
Security staff checked bags for, among other things, placards and signs, which were banned from the meeting.
During the debate all 12 councillors made their feelings clear.
Mr Kent began by disputing a council staff analysis of the submissions, going on to describe the council's legal advice as coming from "provincial lawyers" when compared to legal advice the Pro-Democracy Society had received from "one of the country's top legal minds".
Mr McVicker said the everyday New Zealander was sick of ongoing Treaty grievances and iwi entitlement, saying he stuck by his principle of "one man, one vote".
He said the process was biased in favour of the Te Arawa proposal from the start.
"Roll on the next election," he said.
Miss Tapsell made it clear the three Maori councillors did not have the right to represent Te Arawa and were elected by the district to represent everyone in the district.
"Change is scary, but that is what we are facing," she said.
Ms Hunt said she was saddened by the "vitriol and the misinformation, and the fear whipped up. I'm saddened by comparisons to Hitler, to apartheid and to Baltimore.
"I'm astounded at the lengths of disruption and discrediting of due process that some people have stooped to, including the veiled threats of dire consequences if we choose not to follow the dogma trotted out as democracy."
Mr Maxwell congratulated the Rotorua Pro-Democracy Society for "waking Te Arawa up" making sure the iwi got involved before finishing his speech with the haka Te Arawa E.
Pro-Democracy Society secretary Reynold Macpherson said the society would spend a month taking in the decision before thinking about whether it would mount any legal challenges.
Former Te Arawa Standing committee member Arapeta Tahana said he was elated by the decision and Te Arawa now faced another challenge to put together the new board.
"We're feeling very proud, it's a step forward for the relationship with the council.
"We acknowledge there's a lot of work to do, we have only just got to the beginning of the starting line. This needs to lead to meaningful results and that's a very clear focus for us," he said.
"I would like to see it established and functioning by early next year," Mrs Chadwick said.
"What is good for Te Arawa is good for Maori and for all the citizens of Rotorua."
