The UK government has created the world's largest marine reserve around the Chagos Islands.
The reserve would cover a 545,000-sq-km area around the Indian Ocean archipelago, regarded as one of the world's richest marine ecosystems.
This will include an area where commercial fishing will be banned.
But islanders, who were evicted to make way for the US air base on the island of Diego Garcia, say a reserve would effectively bar them from returning.
UK Foreign Secretary David Miliband said establishing the reserve would "double the global coverage of the world's oceans under protection".
He commented: "Its creation is a major step forward for protecting the oceans, not just around BIOT [British Indian Ocean Territory] itself, but also throughout the world.
"This measure is a further demonstration of how the UK takes its international environmental responsibilities seriously."
Conservationists say the combination of tropical islands, unspoiled coral reefs and adjacent oceanic abyss makes the area a biodiversity hotspot of global importance.
The archipelago, which has been compared to the Galapagos Islands and to Australia's Great Barrier Reef, hosts the world's biggest living coral structure - the Great Chagos Bank. This is home to more than 220 coral species - almost half the recorded species of the entire Indian Ocean, and more than 1,000 species of reef fish.
William Marsden, chairman of the Chagos Conservation Trust, commented: "Today's decision by the British government is inspirational. It will protect a treasure trove of tropical, marine wildlife for posterity and create a safe haven for breeding fish stocks for the benefit of people in the region."
Mauritius has asserted a claim to sovereignty over the islands; and the UK has agreed to cede the territory when it is no longer required for defence purposes.
But in a letter to the Sunday Times newspaper earlier this year, Mauritius' High Commissioner Abhimanu Kundasamy said: "There can be no legitimacy to the [marine protected area] project without the issue of sovereignty and resettlement being addressed to the satisfaction of the government of Mauritius."
The former residents of the islands, who were evicted from the British overseas territory between 1967 and 1971 to make way for the US Air Force base on the largest island, Diego Garcia, have fought a long-running battle in the UK courts for the right to return.
Of the islands, only Diego Garcia, which has played a key role in the US-led operations in Iraq and Afghanistan, is currently inhabited.
Some Chagossians claim the marine protected area (MPA) would "severely jeopardise" any resettlement, because it would prevent them from fishing - their main livelihood.
The islanders' legal saga is not over; Chagossians are now pursuing their cause through European courts.
In a statement on its website, The UK Chagos Support Association said the Foreign Secretary's announcement left several key questions unanswered and called on Mr Miliband to involve Chagossians in the marine protection project.
The association said the announcement did not make clear whether zones could be established within the MPA in which "limited, sustainable fishing could take place".
The statement also criticised the timing of the decision: "It is... bitterly disappointing that the government has felt it appropriate to make its announcement now, whilst parliament is [in] recess."
In his statement, Mr Miliband pointed out that the decision had been taken following a consultation (in which 90% of those who responded supported greater marine protection). He also said the Foreign Office intended "to continue to work closely with all interested stakeholders".
He added that the decision over the protection zone "is, of course, without prejudice to the outcome of the current, pending proceedings before the European Court of Human Rights".
Some Chagossian representatives back the reserve. Allen Vincatassin, from the UK-based Diego Garcian Society, told BBC News: "I am personally delighted that the Foreign Secretary has made the brave decision to protect the (BIOT)."
Mr Vincatassin told me he regarded the issue of the MPA as separate from the question of the right to return: "If a resettlement occurs in future on the outer islands, the marine protected area can be adjusted. These are two separate issues and I think there has been a deep misunderstanding."
He called the exile of the Chagossians "a great injustice", but added: "We don't want another state to come and exploit the area, do massive construction of hotels and bring in commercial fishing. Then the area will be finished."
Conservationists said the 545,000-sq-km (210,000-sq-mile) protection zone - an area twice the size of the UK - would prohibit activities such as industrial fishing and deep-sea mining.
Alistair Gammell, from the Pew Environment Group, said he was "thrilled" with the decision, adding that the oceans "desperately need better protection".
He commented: "In 2010, the International Year of Biodiversity, the UK has secured a conservation legacy which is unrivalled in scale and significance, demonstrating to the world that it is a leader in conserving the world's marine resources for the benefit of future generations."
The Foreign Office said it had been advised that the BIOT was crucial for repopulating coral systems along the East Coast of Africa and hence to the recovery in the marine food supply in sub-Saharan Africa.
The conditions of the MPA are expected to be enforced by the territory's patrol vessel.