Moreland Council, in Melbourne's north, voted 7-4 on Wednesday night in favour of the motion - making it the most contested vote of the three Melbourne councils to pursue the change.
Last month Darebin Council voted 6-4, while Yarra City Council was unanimous in its decision to abandon celebrations.
The successful motion, proposed by Greens councillor and deputy mayor Samantha Ratnam, states "January 26 marks the beginning of the British invasion of Aboriginal and Torres Strait Islander lands and oppression of the Aboriginal and Torres Strait Islander people".
The council moved that January 26 will no longer be referred to as Australia Day, and it supported action to change the date of Australia's national day.
Moreland councillor Annalivia Carli-Hannan told NITV that while the debate on Wednesday was divided, the motion supported the will of the community.
"Moreland, Yarra and Darebin have communities that have shown a lot of support for changing the date. We've received a lot of emails and correspondence that have supported it," she said.
"And as with everything that's a social shift, it will take time. I believe that we have the patience and the will power to continue with this fight."
Earlier this year, Ms Carli-Hannan and other councillors voted to keep citizenship ceremonies on January 26, a decision that was upheld at Wednesday night's meeting.
Ms Carli-Hannan said it was a tough decision, but one that supported the views of Moreland's diverse migrant community.
"A lot of it is the messaging that we've had in Australia in recent years around this day being our national day," she said.
"But it's also about the fact that, as we've seen with other councils, councils have lost the right to hold all citizenship ceremonies by making this move, and so I think that it's become something that has been quite politicised."
"For a lot of the migrant community that I've spoken to, they really understand the pain of Aboriginal people, and I believe that we are in a really good position to create better awareness about what January 26 represents."
Meanwhile, Cr Ratnam has posted on Facebook stating, "We took a big step in the right direction tonight. We have more work to do but we won't stop until we achieve reconciliation and justice for the wrongs done to our First Nations people".
A video posted on Facebook after the vote shows a lively crowd chanting: "Always was, always will be Aboriginal land," while holding the Aboriginal flag.
However, the decision comes with more opposition than its neighbouring councils.
Wurundjeri Elder Ian Hunter gave an opening address strongly criticising the move. He was one of two Aboriginal Elders who opened with opposing remarks, one supporting and the other against January 26 celebrations.
"How dare you actually take away Australia Day?" Mr Hunter said.
"We are all Australians here. To take those things away from us whether we be Indigenous or non-Indigenous, it's not right."
Assistant Minister for Immigration Alex Hawke reiterated the government's criticism of any council which abandons Australia Day celebrations on January 26.
"We can't have individual councils across the nation changing the date unilaterally, it's a matter for the federal government, and the federal government believes it should be on 26 January," he said.
Australian Greens Senator Rachel Siewert welcomed the change.
“It is clear that the current date for Australia Day is seen as a day of invasion for many Aboriginal and Torres Strait Islander people. It is considered a day of grieving for many."