"It's another step in the right direction for Butchulla people in recognition of the ancient name of the island," says traditional owner Shereene Currie.
According to the Dreamtime story, K'gari was the name of a woman's spirit who was helping in the creation of the lands and waters.
In the process of creation, she found that was what being created was beautiful, and she loved it so much she wanted to stay amongst the waters and the mountains. So she lay down to rest, and she was actually turned into the island.
For around 5000 years, the story has been passed down through generations of Butchulla people, who have always known the island as K'gari.
"The recognition today is also recognition of the extraordinary survival and resilience of the Butchulla people – those who remained here and continued the language and maintained it," Ms Currie told NITV.
It wasn't until the early 1800s that it became known as Fraser's Island, named after Eliza Fraser - a Scottish woman who was stranded on the island for about three months in 1836.
Calls to rename entire island
Ms Currie says the renaming of the national park is only a partial victory for traditional owners, who've been campaigning for decades to have the entire island renamed K'gari, in the same sense as Uluru/Ayers Rock.
"We would like everybody to know officially, as well as in everyday language and how the island is reported in the media and in promotion, for her name to be K’gari," she says.
"We have several hundred thousand visitors to the island every year, and it would not only be culturally right, it makes good economic sense and tourism sense for her to be known by her Aboriginal and proper name."
Queensland Environment Minister Steven Miles said the name change would take effect immediately, but stressed it would only apply to the national park.
“It’s important to note we have only changed the name of this section of the national park – this isn’t a name change for the island itself,” Mr Miles said.
“It was in 2011 that the former Bligh government officially recognised the traditional name for Fraser Island, with K’gari entered as an alternate name for the island in the Queensland Place Names register.”