Heritage groups in New Zealand on Monday welcomed a decision to rebuild Christchurch's Anglican cathedral, six years after it was extensively damaged in a deadly earthquake.

Much of the late 19th Century neo-Gothic structure collapsed in the 6.3-magnitude quake that levelled the South Island city's downtown area in February 2011, killing 185 people.

A temporary cathedral made of cardboard was built in 2013 with the derelict one's future hotly debated ever since.

The Anglican Church wanted to tear it down and start anew, saying the restoration cost of more than NZ$100 million ($73 million) was prohibitive.

Heritage groups challenged the decision in court, arguing the cathedral was an intrinsic part of the city's historical fabric.

After years of legal wrangling, a compromise was announced over the weekend which capped the church's liability in the rebuild.

"People are overjoyed and delighted with the decision," Restore Christchurch Cathedral co-chair Mark Belton told AFP. "From our point of view sanity has been restored."

Belton said demolishing the historic cathedral precinct would have "ripped the heart out of the city".

"This will allow a wound to be healed," he said.

Heritage New Zealand's Claire Craig said the restoration was "a significant milestone in the redevelopment of the city".  

"With so much heritage lost following the 2010 and 2011 earthquakes, the recovery of the city’s defining landmark will be welcomed by locals and visitors alike," she said in a statement.

The church expects rebuilding to take up to a decade, with work scheduled to start before the end of this year.