Visitors instantly brandished cameras to capture the unusual sight as the family floated alongside the Queenstown wharf.
Native but not endemic to the South Island, southern crested grebes (kimana) breed on lowland lakes west of the Southern Alps and subalpine and alpine lakes east of the main ranges.
The greatest number are found in inland Canterbury.
There were an estimated 250 birds in 1988, rising to an estimated 400 in 2004.
However, the Department of Conservation believes the total population in New Zealand and Australia is only 3000.
The grebes were first spotted by eagle-eyed Million Dollar Cruise skipper Wayne Perkins.
He said Frankton Arm was fortunate to host three breeding pairs and three individual birds, which he and guests regularly admired on cruises.
"I have seen individual birds come in [to Steamer Wharf] occasionally since 1982, but never with chicks."
Mr Perkins said grebes built floating nests, which were often destroyed by the wakes from large boats.
"That's why for a quarter of a century there were no southern crested grebes in Frankton Arm.
"But now the wakes are smaller and they have re-established themselves.
"Looking at the number of chicks - they are increasing."
Dr Colin O'Donnell, a scientist in Doc's threatened species group in Christchurch, said it was exciting to hear grebes and chicks were on the lake.
"There has been a build-up in numbers over the past five to 10 years, but mainly on Lake Hayes.
"My guess is they've been spreading [and] there are a few potential places for them to nest on Lake Wakatipu.
"Wakes are a risk to them as their nests are low-lying at 20cm to 30cm above the waterline and wakes can wash away the eggs.
"It's always fantastic to see them producing young successfully and maybe the birds have learned to adapt around human habitation."
