British-Australian company Rio Tinto and US-based Alcoa said on Tuesday they would relinquish a 44-year-old agreement with the WA government.
The Mitchell Plateau area in the country's Kimberley region will become part of the Kimberley National Park.
At more than two million hectares, the new park will be Australia's largest.
The termination of the deal between the WA government and the two companies will see more than 175,000 acres  incorporated into the new Kimberley National Park.
The area being surrendered by the joint mining venture is known for its rich flora and fauna, as well as the spectacular Mitchell and Merthen Falls and indigenous rock art more than 40,000 years old.
The new park will also incorporate the existing Prince Regent, Mitchell River and Lawley River national parks.
Sam Walsh, chief executive of Rio Tinto, acknowledged that the successful development of an alumina refinery on the site - which was part of the deal - had "always proven to be economically challenging".
Mr Walsh said Rio Tinto was "proud to be able to encourage the government's ambition to establish a new National Park in the Kimberley region, with this significant addition to the conservation area".
Western Australia Premier Colin Barnett said: "The Mitchell Plateau and the Mitchell Falls are spectacular and unique landscapes in Australia and will be the jewels in the crown of the new Kimberley National Park.
"I am delighted that thanks to this agreement, this extraordinary landscape will now be conserved."
Legislation will be introduced in Parliament this week to cancel the mining deal and it is expected to receive cross-party support.
The two mining companies have agreed to contribute approximately A$750,000 (Â£400,000; $590,000) to restore parts of the landscape which have seen exploratory drilling.
Mining giants Rio Tinto and Alcoa have agreed to scrap plans for a new mine in Western Australia to allow the land to be incorporated into a national park.