President Sebastian Pinera said the Indigenous Development Area would benefit about 1,000 families on the economic, cultural and educational fronts.

The Mapuche are Chile's largest indigenous group, making up about six percent of the population, or some 700,000 people.

"We have the firm desire to ... put in action a plan that will lead to their full integration into society," Pinera said from the presidential palace, calling it a historic debt to a people with a poverty rate twice as high as the national average.

The Chilean state annexed large portions of their southern lands at the end of the 19th century.

Tensions have flared in the southern Araucania region, a stronghold of the Mapuche minority, since the radicalization of the Mapuche movement following the end of Augusto Pinochet's dictatorship in 1990.

In recent years tensions have surged anew over lands the Mapuche say are their traditional lands, first taken by the Spanish and later by the Chilean state which parceled them out to wood and paper companies.