Voters backing Bougainville's independence from Papua New Guinea have won a landslide referendum victory in a major step toward the troubled isles becoming the world's newest nation.

Chairman of the Bougainville Referendum Commission, former taoiseach Bertie Ahern, declared 176,928 people - around 98% of voters - had backed independence with just 3,043 supporting the option of remaining part of Papua New Guinea with more autonomy.

The announcement prompted loud cheers, applause and tears as dignitaries soon burst into song, with strains of the islands' anthem "My Bougainville" ringing out.

The historic vote caps a decades-long peace process and a long recovery from a brutal civil war between Bougainville rebels, Papua New Guinea security forces and foreign mercenaries that ended in 1998 and left up to 20,000 people dead – 10% of the population.

"Now, at least psychologically, we feel liberated," said John Momis, the priest-turned-leader of the autonomous region's government.

But independence will not be immediate, a long political process lies ahead and leaders face formidable financial and administrative challenges to turn a cluster of poor Pacific islands into a fully-fledged nation.

The result must first be ratified by Papua New Guinea's parliament - where there is opposition to the move for fear it may spark other independence movements in a nation defined by disparate linguistic and tribal groups.

But the scale of the victory for the pro-independence side will heap pressure on Port Moresby to endorse the outcome.

"There's no misinterpreting this result - Bougainville wants independence" said Shane McLeod of Sydney's Lowy Institute.

"The strength of the vote would seem to make it all but inevitable."

"Port Moresby will need to quickly digest the result," he said, "they'll need to be ready to talk about the timetable for independence."

Speaking in Buka, Mr Ahern urged all sides to recognise a vote that was about "your peace, your history, and your future" and showed "the power of the pen over weapons".

Puka Temu, Port Moresby's minister for Bougainville affairs, said "the outcome is a credible one" but asked that voters "allow the rest of Papua New Guinea sufficient time to absorb this result". 

In stark contrast to past internecine bloodshed, voting began on 23 November  with ecstatic residents forming makeshift choirs that stomped through the streets, waving independence flags, blowing bamboo pipes and chanting in chorus.

The vote officially ended on 7 December and according to the Bougainville Referendum Commission it passed off without major incident.

Since French explorer Louis de Bougainville arrived on this palm-fringed Melanesian archipelago more than 200 years ago, control has passed from Germany to Australia to Japan to the United Nations and to Papua New Guinea.

Many Bougainvilleans however feel a closer cultural affinity to the nearby Solomon Islands, with a strong provincial identity that differs from the tribal factions of other regions of Papua New Guinea.

The 1988-1998 war had its roots in a struggle over revenues from the now-shut Panguna copper mine, which at one point accounted for more than 40% of Papua New Guinea's exports.

The mine is estimated to still hold more than five million tonnes of copper and 19 million ounces of gold - worth billions of euro at current market prices.