The High Court dismissed the appeal against a decision in the Federal Court, which found the Gumatj clan's Country in northeast Arnhem Land was not acquired "on just terms" before being leased to the Swiss-Australian mining consortium, Nabalco in 1968.
The decision has cleared the way for up to $700 million in compensation for Gumatj people.
Gumatj leaders Djawa Yunupingu and Balupalu Yunupingu celebrated outside the High Court on Wednesday after hearing the judgment against the Commonwealth.
"Justice has been served for my people and the people of northeast Arnhem Land," Djawa Yunupingu said.
In May 2023, the Federal Court found native title rights and interests are property, and extinguishment of them is an acquisition that must be made under "just terms".
Renowned land rights activist, the late Gumatj leader Dr Yunupingu originally brought the case in 2019, alongside an application for native title on behalf of his clan.
In its judgment on Wednesday, the High Court upheld this decision, paving the way for Gumatj to seek compensation.
"Native title recognises that, according to their laws and customs, Indigenous Australians have a connection with Country," the judgment read.
"It is a connection which existed and persisted before and beyond settlement, before and beyond the assertion of sovereignty and before and beyond federation.
"It is older and deeper than the constitution."
The federal government had argued if its appeal failed it would be liable to pay native title holders compensation "to an indeterminate number of grants of interests" in Northern Territory land and that would have "enormous financial ramifications".
When asked if the decision would open the door for compensation, Prime Minister Anthony Albanese said the government would allow the legal process to take its course.
"The decision is, of course, not a final decision," he said.
"There'll be a whole court process arising out of this."
That legal process will include consideration of a native title claim over the area, likely including other clans from the region, which is yet to be determined.
Lawyer for Gumatj, Sean Bowden, said the courts will now have to work out what "just terms" means, following the High Court decision.
"What are just terms when you've had your traditional Country taken from you without your consent, when you've had your sacred places destroyed in front of your eyes, when you've had to live with a refinery and smokestacks over your shoulder," he said.
National Native Title Council chief executive Jamie Lowe said the decision shows the strength of native title and should be seen as an opportunity for communities who have historically been dispossessed.
"Where the Commonwealth, states or territories have acted in a way that fails to respect constitutional or other legal protections, then it is common sense that there will be redress," he said.
"This ought to be seen as an opportunity to economically empower communities who have been historically dispossessed.
"It is not controversial that the communities impacted by projects on their Country should benefit from the wealth generated through those projects."
Greens Senator Dorinda Cox said the decision was a win, not just for Gumatj people, but for all First Nations people.
"It confirms what we have long known - native title is not just symbolic, it is real, legal property, and the government cannot be allowed to take this away without fair compensation," she said.
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