The vast division of Grey, which covers the majority of South Australia, is being renamed as O'Donoghue.
The Australian Electoral Commission, which announced the decision on Monday, is changing the name despite a majority of community submissions arguing to retain Grey, named after Sir George Grey.
O'Donoghue, a member of the Stolen Generations, was the first Aboriginal women to be trained as a nurse despite racist prohibitions at the time.
She would serve as the founding chairperson of both the National Aboriginal Conference and ATSIC – the Aboriginal and Torres Strait Islander Commission - when her advocacy was pivotal to Australia's native title legislation.
O'Donoghue was a Yankunytjatjara woman, with the electorate of Grey taking in most of the Anangu Pitjantjatjara Yankunytjatjara lands.
Of 310 submissions, 235 wanted to retain Grey, while 75 supported the switch to O'Donoghue.
The AEC found the arguments for change were "well detailed, informative, convincing and ultimately persuasive. This contrasted with most of the submissions objecting to the renaming of the electorate".
The commission noted Sir George spent "a comparatively small part of his life" in Australia, with longer service to the British Empire in South Africa and New Zealand.
Instead, the AEC decided "the time had come to recognise the outstanding contribution to Australia and its people made by a distinguished Australian".
The decision comes after an AEC proposal last week to rename the southern Tasmanian seat of Franklin to Tongerlongeter.
Tongerlongeter was an Indigenous warrior who fought colonisation, then took on a leadership role for Aboriginal Tasmanians exiled to Flinders Island.
The AEC has opened consultations on the Franklin switch, which comes after a radical re-drawing of the electorate's boundaries.
Former prime minister Tony Abbott was scathing of the decision, saying it was a "decision by stealth" by unelected officials.
Mr Abbott, now the federal Liberal Party president, says Tongerlongeter is worthy of better recognition, but proposes a statue.
"Better that than posthumously recruiting him into the culture wars that are dividing and demoralising our nation," he wrote.
While some historians have heralded the Franklin rebadging, the federal member of the seat, Julie Collins, says she does not support it.
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