The southern Tanami Desert in the Northern Territory is home to the country's most endangered species.
The survival of these animals has come under threat from pests like feral cats and foxes. Fires are also a threat to the area.
Indigenous rangers will now work to protect the area.
The new conservation zone - said to be Australia's largest - encompasses deserts and savannas.
The designation follows four years of discussions between the government, Aboriginal organisations and environmentalists.
Aboriginal groups are tasked with managing the Indigenous Protected Area (IPA). Their duties include protecting endangered species like the bilby, a small marsupial, and the great desert skink, a burrowing lizard.
Aside from boosting employment, tribal leaders say the conservation agreement will also help sustain their way of life, says the BBC's Phil Mercer.
Land lies at the heart of Aboriginal culture, where the Earth is considered to be the mother of creation, our correspondent adds.
Australia has declared more than 10 million hectares (24.71 million acres) of Aboriginal land as its largest conservation zone.