Dunedin anti-palm oil campaigner Judith Curran said she was "over the moon" about "a courageous" Cadbury decision.
"It just shows you - you can make a difference."
The giant multinational has been under sustained attack since May when it began replacing some cocoa butter in its dairy milk with palm oil to make the chocolate softer and cheaper.
The change prompted many up-in-arms chocolate lovers to write letters to the editor of the Otago Daily Times.
Others who protested were Auckland Zoo, Ms Curran's group - Anti Palm-oil Enterprise, and a Facebook site with 3000 members.
They were concerned the use of palm oil promoted the destruction of jungle in Borneo to make way for new palm plantations.
Cadbury yesterday maintained its palm oil was certified as sustainable.
However, managing director Matthew Oldham said the company was "responding to consumers" by reversing the change it made to its dairy milk recipe.
"We genuinely believed we were making the right decision, for the right reasons.
"But we got it wrong.
"Now we're putting things right as soon as we possibly can, and hope Kiwis will forgive us."
The palm oil would be replaced with more of the more expensive cocoa butter but Mr Oldham told the Otago Daily Times the wholesale price of the chocolate would not rise.
Ms Curran said yesterday's decision was most unexpected.
"I think this is an incredibly courageous act.
"Now, I guess, we should be totally returning to Cadbury in every possible way."
She believed Cadbury's decision would make other multinationals "sit up and take notice".
"And that is what is the most important element in all of this because Cadbury was by no means the worst offender in this at all.
"They were minor compared to some of the other big multinational companies."
Her group's campaign to educate the public about palm oil was just beginning.
Supermarkets were full of products containing palm oil but labelling often did not distinguish between palm oil and other vegetable oils.
Mr Oldham confirmed palm oil had been, and would continue to be, used in other Cadbury products - usually as part of the vegetable oil in such fillings as caramel.
Mars New Zealand, which sells Snickers, Mars, Twix, Skittles and M&Ms, announced yesterday that for financial reasons it would reduce the size of its products.
Bags of M&Ms, for example, will reduce from 250g to 200g.
