Teina Pora has been awarded $2,520,949.42 compensation and received a Government apology for being wrongfully convicted of rape and murder.
The entire Crown case against Mr Pora has been rejected by a retired High Court judge contracted to review the case by the Government.
Mr Pora spent 21 years in prison for the rape and murder of Susan Burdett.
Justice Minister Amy Adams made the announcement this afternoon.
Rodney Hansen, QC, said he could have found Mr Pora innocent on a higher standard than on the balance of probabilities - the test to trigger a Government payment for a wrongful conviction.
Justice Hansen was appointed last year to review the case after the Privy Council quashed Mr Pora's convictions and directed that he not be tried again for the 1992 crimes.
In his report, Justice Hansen said: "Indeed the state of the evidence is such that, in my view, he could have proved his innocence to an even higher level."
Justice Hansen has concluded that convicted serial rapist Malcolm Rewa acted alone and was solely responsible for the crimes.
Rewa was convicted of sex attacks on 25 women including the rape of Ms Burdett. But two juries couldn't agree whether he murdered her. After the second hung jury, the Solicitor-General stayed a third prosecution. Rewa will be eligible for parole in 2018.
Justice Hansen was critical of aspects of the Crown case and police procedure and of the meddling role played by some of Mr Pora's extended family.
The case against Mr Pora relied upon his confession which the Crown said broadly conformed to the forensic evidence, showed knowledge indicating he was likely present and was supported by the evidence of other witnesses.
"That is not the view I take," Justice Hansen said. Pora's confession was "a transparent concoction" which "against the odds" persuaded police that he was present.
Mr Pora had not divulged anything he could only have known by being there and made mistakes in his interview that he would not have made had he been present, Justice Hansen said.
"All the indicators are that he made it up as he went along. Lured by the prospect of a reward, lulled by the belief that the consequences for him would not be drastic and with his judgment and his thinking befuddled by FASD [Fetal Alcohol Spectrum Disorder], Mr Pora set out to persuade the police that he was there.
"Against the odds he succeeded by using knowledge he already had, information unwittingly fed to him by his interrogators and with the help of family members who had already formed the view that he was guilty ... His account is so plainly a fabrication that it collapses under its own weight."
Most of the "independent" evidence said to corroborate the confession came from family members who had already decided Mr Pora "did it" and the "assistance" they gave to the Crown case, including highly persuasive evidence purporting to link Mr Pora to the crime scene, had its origins in that mind-set, the judge said.
Subsequent events had vindicated the judgment of detective sergeant Karl Wright St Clair "that family members conspired to incriminate Mr Pora".
Evidence from some family members was also among that relied on to show an association between Mr Pora and Rewa. Justice Hansen found that evidence was similarly suspect.
"I find the undisputed evidence leads to the irresistible inference that Malcolm Rewa acted alone and was soley responsible for the rape and murder of Ms Burdett. There is no credible evidence to show that he was accompanied by Mr Pora."
Mr Pora did not name Rewa - even when to do so would have likely resulted in his early release from prison - "because he did not know who he was".
"He did not know who the rapist was because he was not present when Ms Burdett was raped and murdered."
At a press conference this afternoon, Ms Adams read out her apology letter to Mr Pora at his request.
"I am very happy to do so," she said.
She accepted that some people felt that the payout to Mr Pora should have been higher, saying that there were "a range of views" on the final figure.
The minister said she was open to the reviewing the Cabinet guidelines for awarding compensation.
"That's a decision we can certainly have. But the reality is that that would never have affected Mr Pora's application because his application will be dealt with on the guidelines at the time.
"You can't move the goalposts halfway through the process."
Mr Hansen's report showed that $1.9 million of the compensation was for loss of liberty, $225,000 was for non-pecuniary losses, and $334,000 was for loss of livelihood, potential earnings and legal fees.
Asked whether Rewa could be re-investigated as a result of the review, Ms Adams said that Mr Hansen's conclusions did not amount to legal findings.
"He was specifically asked only to consider Mr Pora's involvement," she said.
"But nothing in his report is a finding in respect to the culpability of Mr Rewa."
It was up to the Crown Prosecution Service to decide whether Rewa could face further investigation.
Teina Pora's lawyer's say they had hoped he would be offered more than $2.5 million in compensation.
Speaking this afternoon in Herne Bay, Jonathan Krebs and Ingrid Squire told media they had asked for up to $8 million in compensation from the Crown for the 21 years Mr Pora spent wrongfully imprisoned for a rape and murder he did not commit.
The minister was also asked how the Government could prevent similar miscarriages of justice.
She said Mr Hansen had found some shortcomings in the police's handling of the case, but also that the responsibility for the case "could not be laid solely at the door of police".
Neither court heard the crucial evidence which eventually led to his innocence, she said - the finding that Mr Pora had foetal alcohol spectrum disorder and that this affected his confession.
"What it tells us is that at the time Mr Pora was prosecuted and convicted ... the system simply didn't know as much about foetal alcohol spectrum disorder as it now does."
This could not be regarded as a failing, she said, but simply as a "tragic" matter for Mr Pora.
